Tatad vs. Secretary of The Department of ENERGY

330 SUPREME COURT REPORTS
ANNOTATED
Tatad vs. Secretary of the Department of
Energy
*
G.R. No. 124360. November 5, 1997.
FRANCISCO S. TATAD, petitioner, vs. THE

SECRETARY OF THE DEPARTMENT OF
ENERGY AND THE SECRETARY OF THE
DEPARTMENT OF FINANCE, respondents.
*
G.R. No. 127867. November 5, 1997.
EDCEL C. LAGMAN, JOKER P. ARROYO,

ENRIQUE GARCIA, WIGBERTO TAÑADA,
FLAG HUMAN RIGHTS FOUNDATION,
INC., FREEDOM FROM DEBT COALITION
(FDC), SANLAKAS, petitioners, vs. HON.
RUBEN TORRES in his capacity as the
Executive Secretary, HON. FRANCISCO
VIRAY, in his capacity as the Secretary of
Energy, CALTEX Philippines, Inc., PETRON
Corporation and PILIPINAS SHELL
Corporation, respondents.
Constitutional Law; Statutes; Courts; The courts,

as guardians of the Constitution, have the inherent
authority to determine whether a statute enacted by
the legislature transcends the limit imposed by the
fundamental law.—Judicial power includes not only
the duty of the courts to settle actual controversies
involving rights which are legally demandable and
enforceable, but also the duty to determine whether
or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the
government. The courts, as guardians of the
Constitution, have the inherent authority to
determine whether a statute enacted by the
legislature transcends the limit imposed by the
fundamental law. Where a statute violates the
Constitution, it is not only the right but the duty of
the judiciary to declare such act as unconstitutional
and void.
Same; Same; Same; The Court has brightlined
its liberal stance on a petitioner’s locus standi where
the petitioner is able to craft an issue of
transcendental significance to the people.—The effort
of respondents to question the locus standi of
petitioners must also fall on barren ground. In
language too lucid to be misunderstood, this Court
has brightlined its liberal stance on a petitioner’s
locus standi where the petitioner is able to craft an
issue of transcendental sig-
_______________
* EN BANC.
331
VOL. 281, NOVEMBER 5, 1997 331
Tatad vs. Secretary of the Department of Energy

nificance to the people. In Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v.
Tan, we stressed: “x x x Objections to taxpayers’ suit
for lack of sufficient personality, standing or interest
are, however, in the main procedural matters.
Considering the importance to the public of the cases
at bar, and in keeping with the Court’s duty, under
the 1987 Constitution, to determine whether or not
the other branches of government have kept
themselves within the limits of the Constitution and
the laws and that they have not abused the
discretion given to them, the Court has brushed
aside technicalities of procedure and has taken
cognizance of these petitions.”
Same; Same; Same; Court holds that Section
5(b) providing for tariff differential is germane to the
subject of R.A. No. 8180 which is the deregulation of
the downstream oil industry.—In G.R. No. 124360
where petitioner is Senator Tatad, it is contended
that section 5(b) of R.A. No. 8180 on tariff
differential violates the provision of the Constitution
requiring every law to have only one subject which
should be expressed in its title. We do not concur
with this contention. As a policy, this Court has
adopted a liberal construction of the one title—one
subject rule. We have consistently ruled that the
title need not mirror, fully index or catalogue all
contents and minute details of a law. A law having a
single general subject indicated in the title may
contain any number of provisions, no matter how
diverse they may be, so long as they are not
inconsistent with or foreign to the general subject,
and may be considered in furtherance of such subject
by providing for the method and means of carrying
out the general subject. We hold that section 5(b)
providing for tariff differential is germane to the
subject of R.A. No. 8180 which is the deregulation of
the downstream oil industry. The section is supposed
to sway prospective investors to put up refineries in
our country and make them rely less on imported
petroleum.
Same; Same; Same; Two accepted tests to
determine whether or not there is a valid delegation
of legislative power.—“There are two accepted tests
to determine whether or not there is a valid
delegation of legislative power, viz: the completeness
test and the sufficient standard test. Under the first
test, the law must be complete in all its terms and
conditions when it leaves the legislative such that
when it reaches the delegate the only thing he will
have to do is to enforce it. Under the sufficient
standard test, there must be adequate guidelines or
limitations in the law to map out the boundaries of
the delegate’s authority and prevent the delegation
from running
332
332 SUPREME COURT REPORTS ANNOTATED
riot. Both tests are intended to prevent a total

transference of legislative authority to the delegate,
who is not allowed to step into the shoes of the
legislature and exercise a power essentially
legislative.”
Same; Same; Same; Section 15 can hurdle both
the completeness test and the sufficient standard test.
—Given the groove of the Court’s rulings, the
attempt of petitioners to strike down section 15 on
the ground of undue delegation of legislative power
cannot prosper. Section 15 can hurdle both the
completeness test and the sufficient standard test. It
will be noted that Congress expressly provided in
R.A. No. 8180 that full deregulation will start at the
end of March 1997, regardless of the occurrence of
any event. Full deregulation at the end of March
1997 is mandatory and the Executive has no
discretion to postpone it for any purported reason.
Thus, the law is complete on the question of the final
date of full deregulation.
Same; Same; Same; Court holds that the
Executive department failed to follow faithfully the
standards set by R.A. No. 8180 when it considered
the extraneous factor of depletion of the OPSF fund.
—But petitioners further posit the thesis that the
Executive misapplied R.A. No. 8180 when it
considered the depletion of the OPSF fund as a
factor in fully deregulating the downstream oil
industry in February 1997. A perusal of Section 15 of
R.A. No. 8180 will readily reveal that it only
enumerated two factors to be considered by the
Department of Energy and the Office of the
President, viz.: (1) the time when the prices of crude
oil and petroleum products in the world market are
declining, and (2) the time when the exchange rate of
the peso in relation to the US dollar is stable.
Section 15 did not mention the depletion of the
OPSF fund as a factor to be given weight by the
Executive before ordering full deregulation. On the
contrary, the debates in Congress will show that
some of our legislators wanted to impose as a pre-
condition to deregulation a showing that the OPSF
fund must not be in deficit. We therefore hold that
the Executive department failed to follow faithfully
the standards set by R.A. No. 8180 when it
considered the extraneous factor of depletion of the
OPSF fund.
Same; Same; Same; Republic Act No. 8180 needs
provisions to vouchsafe free and fair competition.—
R.A. No. 8180 contains a separability clause. Section
23 provides that “if for any reason, any section or
provision of this Act is declared unconstitutional or
invalid, such parts not affected thereby shall remain
in full force and effect.” This separability clause
notwithstanding, we hold that the offending
333
VOL. 281, NOVEMBER 5, 1997 333
provisions of R.A. No. 8180 so permeate its essence

that the entire law has to be struck down. The
provisions on tariff differential, inventory and
predatory pricing are among the principal props of
R.A. No. 8180. Congress could not have deregulated
the downstream oil industry without these
provisions. Unfortunately, contrary to their intent,
these provisions on tariff differential, inventory and
predatory pricing inhibit fair competition, encourage
monopolistic power and interfere with the free
interaction of market forces. R.A. No. 8180 needs
provisions to vouchsafe free and fair competition.
The need for these vouchsafing provisions cannot be
overstated. Before deregulation, PETRON, SHELL
and CALTEX had no real competitors but did not
have a free run of the market because government
controls both the pricing and non-pricing aspects of
the oil industry. After deregulation, PETRON,
SHELL and CALTEX remain unthreatened by real
competition yet are no longer subject to control by
government with respect to their pricing and non-
pricing decisions. The aftermath of R.A. No. 8180 is
a deregulated market where competition can be
corrupted and where market forces can be
manipulated by oligopolies.
KAPUNAN, J., Separate Opinion

Constitutional Law; Statutes; Courts; The tariff
differential between imported crude oil and refined
petroleum products defeats the purpose of the law
and should thus be struck down.—Since the
prospective oil companies do not (as yet) have local
refineries, they would have to import refined
petroleum products, on which a 7% tariff duty is
imposed. On the other hand, the existing oil
companies already have domestic refineries and,
therefore, only import crude oil which is taxed at a
lower rate of 3%. Tariffs are part of the costs of
production. Hence, this means that with the 4%
tariff differential (which becomes an added cost) the
prospective players would have higher production
costs compared to the existing oil companies and it is
precisely this factor which could seriously affect its
decision to enter the market. Viewed in this light,
the tariff differential between imported crude oil and
refined petroleum products becomes an obstacle to
the entry of new players in the Philippine oil
market. It defeats the purpose of the law and should
thus be struck down.
PANGANIBAN, J., Concurring Opinion
Constitutional Law; Statutes; Courts; Court has

the duty, not just the power, to determine whether a
law or a part thereof offends
334
the Constitution and, if so, to annul and set aside.—

Under the Constitution, this Court has—in
appropriate cases—the DUTY, not just the power, to
determine whether a law or a part thereof offends
the Constitution and, if so, to annul and set aside.
Because a serious challenge has been hurled against
the validity of one such law, namely RA 8180—its
criticality having been preliminary determined from
the petition, comments, reply and, most tellingly, the
oral argument on September 30, 1997—this Court,
in the exercise of its mandated judicial discretion,
issued the status quo order to prevent the continued
enforcement and implementation of a law that was
prima facie found to be constitutionally infirm.
Indeed, after careful final deliberation, said law is
now ruled to be constitutionally defective thereby
disabling respondent oil companies from exercising
their erstwhile power, granted by such defective
statute, to determine prices by themselves.
Same; Same; Same; Court has the prerogative to
uphold the Constitution and to strike down and
annul a law that contravenes the Charter.—
Concededly, this Court has no power to pass upon
the wisdom, merits and propriety of the acts of its co-
equal branches in government. However, it does
have the prerogative to uphold the Constitution and
to strike down and annul a law that contravenes the
Charter. From such duty and prerogative, it shall
never shirk or shy away.
MELO, J., Dissenting Opinion
Constitutional Law; Statutes; Courts; The

submissions of petitioners require a review of issues
that are in the nature of political questions, hence,
clearly beyond the ambit of judicial inquiry.—The
instant petitions do not raise a justiciable controversy
as the issues raised therein pertain to the wisdom
and reasonableness of the provisions of the assailed
law. The contentions made by petitioners, that the
“imposition of different tariff rates on imported
crude oil and imported refined petroleum products
will not foster a truly competitive market, nor will it
level the playing fields” and that said imposition
“does not deregulate the downstream oil industry,
instead, it controls the oil industry, contrary to the
avowed policy of the law,” are clearly policy matters
which are within the province of the political
departments of the government. These submissions
require a review of issues that are in the nature of
political questions, hence, clearly beyond the ambit
of judicial inquiry.
335
VOL. 281, NOVEMBER 5, 1997 335
Same; Same; Same; Political questions are

concerned with issues dependent upon the wisdom,
not the legality, of a particular measure.—A political
question refers to a question of policy or to issues
which, under the Constitution, are to be decided by
the people in their sovereign capacity, or in regard to
which full discretionary authority has been
delegated to the legislative or executive branch of
the government. Generally, political questions are
concerned with issues dependent upon the wisdom,
not the legality, of a particular measure.
Same; Same; Same; Actions; The existence of a
constitutional issue in a case does not per se confer or
clothe a legislator with locus standi to bring suit.—
The petitioners do not have the necessary locus
standi to file the instant consolidated petitions.
Petitioners Lagman, Arroyo, Garcia, Tanada, and
Tatad assail the constitutionality of the above-stated
laws through the instant consolidated petitions in
their capacity as members of Congress, and as
taxpayers and concerned citizens. However, the
existence of a constitutional issue in a case does not
per se confer or clothe a legislator with locus standi
to bring suit. In Phil. Constitution Association
(PHILCONSA) v. Enriquez (235 SCRA 506 [1994]),
we held that members of Congress may properly
challenge the validity of an official act of any
department of the government only upon showing
that the assailed official act affects or impairs their
rights and prerogatives as legislators. In Kilosbayan,
Inc., et al. vs. Morato, et al. (246 SCRA 540 [1995]),
this Court further clarified that “if the complaint is
not grounded on the impairment of the power of
Congress, legislators do not have standing to
question the validity of any law or official action.”
Same; Same; Same; Same; Republic Act No.
8180 clearly does not violate or impair prerogatives,
powers, and rights of Congress, or the individual
members thereof.—Republic Act No. 8180 clearly
does not violate or impair prerogatives, powers, and
rights of Congress, or the individual members
thereof, considering that the assailed official act is
the very act of Congress itself authorizing the full
deregulation of the downstream oil industry.
Same; Same; Same; Same; Neither can
petitioners sue as taxpayers or concerned citizens.—
Neither can petitioners sue as taxpayers or
concerned citizens. A condition sine qua non for the
institution of a taxpayer’s suit is an allegation that
the assailed action is an unconstitutional exercise of
the spending powers of Congress or that it
constitutes an illegal disbursement of public funds.
The instant
336

consolidated petitions do not allege that the assailed

provisions of the law amount to an illegal
disbursement of public money. Hence, petitioners
cannot, even as taxpayers or concerned citizens,
invoke this Court’s power of judicial review.
Same; Same; Same; Same; The interest of the
person assailing the constitutionality of a statute
must be direct and personal.—Further, petitioners,
including Flag, FDC, and Sanlakas, can not be
deemed proper parties for lack of a particularized
interest or elemental substantial injury necessary to
confer on them locus standi. The interest of the
person assailing the constitutionality of a statute
must be direct and personal. He must be able to
show, not only that the law is invalid, but also that
he has sustained or is in immediate danger of
sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby
in some indefinite way. It must appear that the
person complaining has been or is about to be denied
some right or privilege to which he is lawfully
entitled or that he is about to be subjected to some
burdens or penalties by reason of the statute
complained of. Petitioners have not established such
kind of interest.
Same; Same; Section 5(b) of Republic Act No.
8180 is not violative of the “one title-one subject” rule
under Section 26(1), Article VI of the Constitution.—
Section 5(b) of Republic Act No. 8180 is not violative
of the “one title-one subject” rule under Section
26(1), Article VI of the Constitution. It is not
required that a provision of law be expressed in the
title thereof as long as the provision in question is
embraced within the subject expressed in the title of
the law. The “title of a bill does not have to be a
catalogue of its contents and will suffice if the
matters embodied in the text are relevant to each
other and may be inferred from the title.”
(Association of Small Landowners in the Phils., Inc.
vs. Sec. of Agrarian Reform, 175 SCRA 343 [1989])
An “act having a single general subject, indicated in
the title, may contain any number of provisions, no
matter how diverse they may be, so long as they are
not inconsistent with or foreign to the general
subject, and may be considered in furtherance of
such subject by providing for the method and means
of carrying out the general object.”
Same; Same; Same; The conference committee
can even include an amendment in the nature of a
substitute so long as such amendment is germane to
the subject of the bill before it.—As regards the power
of the Bicameral Conference Committee to include in
its
337
VOL. 281, NOVEMBER 5, 1997 337
report an entirely new provision that is neither

found in the House bill or Senate bill, this Court
already upheld such power in Tolentino vs. Sec. of
Finance (235 SCRA 630 [1994]), where we ruled that
the conference committee can even include an
amendment in the nature of a substitute so long as
such amendment is germane to the subject of the bill
before it.
FRANCISCO, J., Dissenting Opinion
Constitutional Law; Statutes; Courts; Congress

is not required to employ in the title of an enactment,
language of such precision as to mirror, fully index or
catalogue all the contents and the minute details
therein.—The interpretation of “one subject-one title”
rule, however, is never intended to impede or stifle
legislation. The requirement is to be given a
practical rather than a technical construction and it
would be sufficient compliance if the title expresses
the general subject and all the provisions of the
enactment are germane and material to the general
subject. Congress is not required to employ in the
title of an enactment, language of such precision as
to mirror, fully index or catalogue all the contents
and the minute details therein. All that is required
is that the title should not cover legislation
incongruous in itself, and which by no fair
intendment can be considered as having a necessary
or proper connection.
Same; Same; Same; If a particular statute is
within the constitutional power of the legislature to
enact, it should be sustained whether the courts agree
or not in the wisdom of its enactment.—Perhaps it
bears reiterating that the question of validity of
every statute is first determined by the legislative
department of the government, and the courts will
resolve every presumption in favor of its validity.
The courts will assume that the validity of the
statute was fully considered by the legislature when
adopted. The wisdom or advisability of a particular
statute is not a question for the courts to determine.
If a particular statute is within the constitutional
power of the legislature to enact, it should be
sustained whether the courts agree or not in the
wisdom of its enactment. This Court continues to
recognize that in the determination of actual cases
and controversies, it must reflect the wisdom and
justice of the people as expressed through their
representatives in the executive and legislative
branches of government. Thus, the presumption is
always in favor of constitutionality for it is likewise
always presumed that in the enactment of a law or
the adoption of a policy it is the people who speak
through their representatives. This principle is one
of
338
caution and circumspection in the exercise of the

grave and delicate function of judicial review.
PETITIONS to review the constitutionality of

R.A. 8180.
The facts are stated in the opinion of the Court.

Sanidad, Abaya, Cortez, Te, Madrid,
Viterbo & Tan Law Firm for petitioners.
Alfonso M. Cruz Law Offices for Enrique
Garcia.
Brillantes, Navarro, Jumamil, Arcilla,
Escolin and Martinez Law Office for petitioner
in G.R. 104360.
Angara, Abello, Concepcion, Regala &
Cruz for Caltex Philippines, Inc.
PUNO, J.:
The petitions at bar challenge the

constitutionality of Republic Act No. 8180
entitled “An Act Deregulating the Downstream
1
Oil Industry and For Other Purposes.” R.A.
No. 8180 ends twenty six (26) years of
government regulation of the downstream oil
industry. Few cases carry a surpassing
importance on the life of every Filipino as these
petitions for the upswing and downswing of our
economy materially depend on the oscillation of
oil.
First, the facts without the fat. Prior to
1971, there was no government agency
regulating the oil industry other than those
dealing with ordinary commodities. Oil
companies were free to enter and exit the
market without any government interference.
There were four (4) refining companies (Shell,
Caltex, Bataan Refining Company and Filoil
Refining) and
_______________
1 Downstream oil industry refers to the business of

importing, exporting, re-exporting, shipping, transporting,
processing, refining, storing, distributing, marketing,
and/or selling crude oil, gasoline, diesel, liquefied
petroleum gas, kerosene and other petroleum and crude oil
products.
339
VOL. 281, NOVEMBER 5, 1997 339

Energy
six (6) petroleum marketing companies (Esso,

Filoil, Caltex, Getty, Mobil
2
and Shell), then
operating in the country.
In 1971, the country was driven to its knees
by a crippling oil crisis. The government,
realizing that petroleum and its products are
vital to national security and that their
continued supply at reasonable prices is
essential to the general welfare,
3
enacted the Oil
Industry Commission Act. It created the Oil
Industry Commission (OIC) to regulate the
business of importing, exporting, re-exporting,
shipping, transporting, processing, refining,
storing, distributing, marketing and selling
crude oil, gasoline, kerosene, gas and other
refined petroleum products. The OIC was
vested with the power to fix the market prices
of petroleum products, to regulate the
capacities of refineries, to license new refineries
and to regulate the operations
4
and trade
practices of the industry.
In addition to the creation of the OIC, the
government saw the imperious need for a more
active role of Filipinos in the oil industry. Until
the early seventies, the downstream oil industry
was controlled by multinational companies. All
the oil refineries and marketing companies
were owned by foreigners whose economic
interests did not always coincide with the
interest of the Filipino. Crude oil was
transported to the country by foreign-controlled
tankers. Crude processing was done locally by
foreign-owned refineries and petroleum
products were marketed through foreign-owned
retail outlets. On November 9, 1973, President
Ferdinand E. Marcos boldly created the
Philippine National Oil Corporation (PNOC) to
break the 5
control by foreigners of our oil
industry. PNOC engaged in the business of
refining, marketing, shipping, transporting,
and storing petroleum. It acquired ownership of
ESSO Philippines and Filoil to serve as its
marketing arm. It bought the
____________________________
2 Paderanga & Paderanga, Jr., The Oil Industry in the

Philip-pines, Philippine Economic Journal, No. 65, Vol. 27,
pp. 27-98 [1988].
3 Section 3, R.A. No. 6173.
4 Section 7, R.A. No. 6173.
5 P.D. No. 334.
340

ANNOTATED
Energy
controlling shares of Bataan Refining

Corporation,
6
the largest refinery in the
country. PNOC later put up its own marketing
subsidiary—Petrophil. PNOC operated under
the business name PETRON Corporation. For
the first time, there was a Filipino presence in
the Philippine oil market.
In 1984, President Marcos through Section 8
of Presidential Decree No. 1956, created the Oil
Price Stabilization Fund (OPSF) to cushion the
effects of frequent changes in the price of oil
caused by exchange rate adjustments or
increase in the world market prices of crude oil
and imported petroleum products. The fund is
used (1) to reimburse the oil companies for cost
increases in crude oil and imported petroleum
products resulting from exchange rate
adjustment and/or increase in world market
prices of crude oil, and (2) to reimburse oil
companies for cost underrecovery incurred as a
result of the reduction of domestic prices of
petroleum products. Under the law, the OPSF
may be sourced from:
1. any increase in the tax collection from

ad valorem tax or customs duty
imposed on petroleum products subject
to tax under P.D. No. 1956 arising from
exchange rate adjustment,
2. any increase in the tax collection as a
result of the lifting of tax exemptions of
government corporations, as may be
determined by the Minister of Finance
in consultation with the Board of
Energy,
3. any additional amount to be imposed on
petroleum products to augment the
resources of the fund through an
appropriate order that may be issued by
the Board of Energy requiring payment
of persons or companies engaged in the
business of importing, manufacturing
and/or marketing petroleum products,
or
4. any resulting peso costs differentials in
case the actual peso costs paid by oil
companies in the importation of crude
oil and
_______________
6 Makasiar, G., Structural Response to the Energy Crisis:

The Philippine Case. Energy and Structural Change in the
Asia Pacific Region: Papers and Proceedings of the 13th
Pacific Trade and Development Conference. Published by
the Philippine Institute for Development Studies/Asian
Development Bank and edited by Romeo M. Bautista and
Seiji Naya, pp. 311-312 (1984).
341
VOL. 281, NOVEMBER 5, 1997 341

Energy
petroleum products is less than the peso

costs computed using the reference
foreign exchange7 rate as fixed by the
Board of Energy.
By 1985, only three (3) oil companies were

operating in the country—Caltex, Shell and the
government-owned PNOC.
In May, 1987, President Corazon C. Aquino
signed Executive Order No. 172 creating the
Energy Regulatory Board to regulate the
business of importing, exporting, re-exporting,
shipping, transporting, processing, refining,
marketing and distributing energy resources
“when warranted and only when public
necessity requires.” The Board had the
following powers and functions:
1. Fix and regulate the prices of petroleum

products;
2. Fix and regulate the rate schedule or
prices of piped gas to be charged by
duly franchised gas companies which
distribute gas by means of underground
pipe system;
3. Fix and regulate the rates of pipeline
concessionaires under the provisions of
R.A. No. 387, as amended x x x;
4. Regulate the capacities of new
refineries or additional capacities of
existing refineries and license refineries
that may be organized after the
issuance of (E.O. No. 172) under such
terms and conditions as are consistent
with the national interest; and
5. Whenever the Board has determined
that there is a shortage of any
petroleum product, or when public
interest so requires, it may take such
steps as it may consider necessary,
including the temporary adjustment of
the levels of prices of petroleum
products and the payment to the Oil
Price Stabilization Fund x x x by
persons or entities engaged in the
petroleum industry of such amounts as
may be determined by the Board, which
may enable the importer
8
to recover its
cost of importation.
On December 9, 1992, Congress enacted R.A.

No. 7638 which created the Department of
Energy to prepare, integrate, coordinate,
supervise and control all plans, programs,
projects, and activities of the government in
relation to energy
_______________
7 P.D. 1956 as amended by E.O. 137.

8 Section 3, E.O. No. 172.
342

ANNOTATED
Energy
exploration, development, 9 utilization,

distribution and conservation. The thrust of
the Philippine energy program under the law
was toward privatization of government
agencies related to energy, deregulation of the
power and energy industry and 10
reduction of
dependency on oil-fired plants. The law also
aimed to encourage free and active
participation and investment by the private
sector in all energy activities. Section 5(e) of
the law states that “at the end of four (4) years
from the effectivity of this Act, the Department
shall, upon approval of the President, institute
the programs and timetable of deregulation of
appropriate energy projects and activities of
the energy industry.”
Pursuant to the policies enunciated in R.A.
No. 7638, the government approved the
privatization of Petron Corporation in 1993. On
December 16, 1993, PNOC sold 40% of its
equity in Petron Corporation to the Aramco
Overseas Company.
In March 1996, Congress took the audacious
step of deregulating the downstream oil
industry. It enacted R.A. No. 8180, entitled the
“Downstream Oil Industry Deregulation Act of
1996.” Under the deregulated environment,
“any person or entity may import or purchase
any quantity of crude oil and petroleum
products from a foreign or domestic source,
lease or own and operate refineries and other
downstream oil facilities and market such
crude oil or use the same for his own
requirement,” subject only
11
to monitoring by the
Department of Energy.
The deregulation process has two phases: the
transition phase and the full deregulation
phase. During the transition phase, controls of
the non-pricing aspects of the oil industry were
to be lifted. The following were to be
accomplished: (1) liberalization of oil
importation, exportation, manufacturing,
marketing and distribution, (2) implementation
of an automatic pricing mechanism, (3)
implementation of an automatic formula to set
margins of dealers and rates of haulers, water
_______________
9 R.A. No. 7638.

10 Section 5(b), R.A. No. 7638.
11 Section 5, R.A. No. 8180.
343
VOL. 281, NOVEMBER 5, 1997 343

Energy
transport operators and pipeline

concessionaires, and (4) restructuring of oil
taxes. Upon full deregulation, controls on the
price of oil and the foreign exchange cover were
to be lifted and the OPSF was to be abolished.
The first phase of deregulation commenced
on August 12, 1996.
On February 8, 1997, the President
implemented the full deregulation of the
Downstream Oil Industry through E.O. No.
372.
The petitions at bar assail the
constitutionality of various provisions of R.A.
No. 8180 and E.O. No. 372.
In G.R. No. 124360, petitioner Francisco S.
Tatad seeks the annulment of Section 5(b) of
R.A. No. 8180. Section 5(b) provides:
“b) Any law to the contrary notwithstanding and

starting with the effectivity of this Act, tariff duty
shall be imposed and collected on imported crude oil
at the rate of three percent (3%) and imported
refined petroleum products at the rate of seven
percent (7%), except fuel oil and LPG, the rate for
which shall be the same as that for imported crude
oil: Provided, That beginning on January 1, 2004 the
tariff rate on imported crude oil and refined
petroleum products shall be the same: Provided,
further, That this provision may be amended only by
an Act of Congress.”
The petition is anchored on three arguments:
First, that the imposition of different tariff
rates on imported crude oil and imported
refined petroleum products violates the equal
protection clause. Petitioner contends that the
3%-7% tariff differential unduly favors the
three existing oil refineries and discriminates
against prospective investors in the
downstream oil industry who do not have their
own refineries and will have to source refined
petroleum products from abroad.
Second, that the imposition of different tariff
rates does not deregulate the downstream oil
industry but instead controls the oil industry,
contrary to the avowed policy of the law.
Petitioner avers that the tariff differential
between imported crude oil and imported
refined petroleum products bars the
344

ANNOTATED
Energy
entry of other players in the oil industry

because it effectively protects the interest of oil
companies with existing refineries. Thus, it
runs counter to the objective of the law “to
foster a truly competitive market.”
Third, that the inclusion of the tariff
provision in section 5(b) of R.A. No. 8180
violates Section 26(1) Article VI of the
Constitution requiring every law to have only
one subject which shall be expressed in its title.
Petitioner contends that the imposition of tariff
rates in section 5(b) of R.A. No. 8180 is foreign
to the subject of the law which is the
In G.R. No. 127867, petitioners Edcel C.
Lagman, Joker P. Arroyo, Enrique Garcia,
Wigberto Tañada, Flag Human Rights
Foundation, Inc., Freedom from Debt Coalition
(FDC) and Sanlakas contest the
constitutionality of Section 15 of R.A. No. 8180
and E.O. No. 392. Section 15 provides:
“Sec. 15. Implementation of Full Deregulation.—

Pursuant to Section 5(e) of Republic Act No. 7638,
the DOE shall, upon approval of the President,
implement the full deregulation of the downstream
oil industry not later than March 1997. As far as
practicable, the DOE shall time the full deregulation
when the prices of crude oil and petroleum products
in the world market are declining and when the
exchange rate of the peso in relation to the US dollar
is stable. Upon the implementation of the full
deregulation as provided herein, the transition
phase is deemed terminated and the following laws
are deemed repealed:
xxx
E.O. No. 372 states in full, viz.:
“WHEREAS, Republic Act No. 7638, otherwise

known as the “Department of Energy Act of 1992,”
provides that, at the end of four years from its
effectivity last December 1992, “the Department (of
Energy) shall, upon approval of the President,
institute the programs and time table of
deregulation of appropriate energy projects and
activities of the energy sector”;
WHEREAS, Section 15 of Republic Act No. 8180,
otherwise known as the “Downstream Oil Industry
Deregulation Act of 1996,” provides that “the DOE
shall, upon approval of the President, im-
345
VOL. 281, NOVEMBER 5, 1997 345

plement full deregulation of the downstream oil

industry not later than March, 1997. As far as
is stable”;
WHEREAS, pursuant to the recommendation of
the Department of Energy, there is an imperative
need to implement the full deregulation of the
downstream oil industry because of the following
recent developments: (i) depletion of the buffer fund
on or about 7 February 1997 pursuant to the Energy
Regulatory Board’s Order dated 16 January 1997;
(ii) the prices of crude oil had been stable at $21-$23
per barrel since October 1996 while prices of
petroleum products in the world market had been
stable since mid-December of last year. Moreover,
crude oil prices are beginning to soften for the last
few days while prices of some petroleum products
had already declined; and (iii) the exchange rate of
the peso in relation to the US dollar has been stable
for the past twelve (12) months, averaging at around
P26.20 to one US dollar;
WHEREAS, Executive Order No. 377 dated 31
October 1996 provides for an institutional
framework for the administration of the deregulated
industry by defining the functions and
responsibilities of various government agencies;
WHEREAS, pursuant to Republic Act No. 8180,
the deregulation of the industry will foster a truly
competitive market which can better achieve the
social policy objectives of fair prices and adequate,
continuous supply of environmentally-clean and high
quality petroleum products;
NOW, THEREFORE, I, FIDEL V. RAMOS,
President of the Republic of the Philippines, by the
powers vested in me by law, do hereby declare the
full deregulation of the downstream oil industry.”
In assailing section 15 of R.A. No. 8180 and

E.O. No. 392, petitioners offer the following
submissions:
First, section 15 of R.A. No. 8180 constitutes
an undue delegation of legislative power to the
President and the Secretary of Energy because
it does not provide a determinate or
determinable standard to guide the Executive
Branch in determining when to implement the
full deregulation of the downstream oil
industry. Petitioners contend that the law does
not define when it is practicable for the
Secretary of Energy to recommend to the
President the full deregulation of
346

ANNOTATED
Energy
the downstream oil industry or when the

President may consider it practicable to declare
full deregulation. Also, the law does not provide
any specific standard to determine when the
prices of crude oil in the world market are
considered to be declining nor when the
exchange rate of the peso to the US dollar is
considered stable.
Second, petitioners aver that E.O. No. 392
implementing the full deregulation of the
downstream oil industry is arbitrary and
unreasonable because it was enacted due to the
alleged depletion of the OPSF fund—a
condition not found in R.A. No. 8180.
Third, Section 15 of R.A. No. 8180 and E.O.
No. 392 allow the formation of a de facto cartel
among the three existing oil companies—
Petron, Caltex and Shell—in violation of the
constitutional prohibition against monopolies,
combinations in restraint of trade and unfair
competition.
Respondents, on the other hand, fervently
defend the constitutionality of R.A. No. 8180
and E.O. No. 392. In addition, respondents
contend that the issues raised by the petitions
are not justiciable as they pertain to the
wisdom of the law. Respondents further aver
that petitioners have no locus standi as they
did not sustain nor will they sustain direct
injury as a result of the implementation of R.A.
No. 8180.
The petitions were heard by the Court on
September 30, 1997. On October 7, 1997, the
Court ordered the private respondents oil
companies “to maintain the status quo and to
cease and desist from increasing the prices of
gasoline and other petroleum fuel products for
a period of thirty (30) days x x x subject to
further orders as conditions may warrant.”
We shall now resolve the petitions on the
merit. The petitions raise procedural and
substantive issues bearing on the
constitutionality of R.A. No. 8180 and E.O. No.
392. The procedural issues are: (1) whether or
not the petitions raise a justiciable controversy,
and (2) whether or not the petitioners have the
standing to assail the validity of the subject law
and executive order. The substantive issues are:
(1) whether or not section 5(b) violates the one
title-one subject requirement of the
Constitution; (2) whether or not the same
section violates
347
VOL. 281, NOVEMBER 5, 1997 347

Energy
the equal protection clause of the Constitution;

(3) whether or not section 15 violates the
constitutional prohibition on undue delegation
of power; (4) whether or not E.O. No. 392 is
arbitrary and unreasonable; and (5) whether or
not R.A. No. 8180 violates the constitutional
prohibition against monopolies, combinations
in restraint of trade and unfair competition.
We shall first tackle the procedural issues.
Respondents claim that the avalanche of
arguments of the petitioners assail the wisdom
of R.A. No. 8180. They aver that deregulation
of the downstream oil industry is a policy
decision made by Congress and it cannot be
reviewed, much less be reversed by this Court.
In constitutional parlance, respondents contend
that the petitions failed to raise a justiciable
controversy.
Respondents’ joint stance is unnoteworthy.
Judicial power includes not only the duty of the
courts to settle actual controversies involving
rights which are legally demandable and
enforceable, but also the duty to determine
whether or not there has been grave abuse of
discretion amounting to lack or excess of
jurisdiction on the part of any branch 12
or
instrumentality of the government. The
courts, as guardians of the Constitution, have
the inherent authority to determine whether a
statute enacted by the legislature transcends
the limit imposed by the fundamental law.
Where a statute violates the Constitution, it is
not only the right but the duty of the judiciary
to declare
13
such act as unconstitutional and
void. We14
held in the recent case of Tañada v.
Angara:
“x x x
In seeking to nullify an act of the Philippine
Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a
justiciable controversy. Where an action of the
legislative branch is seriously alleged to have
infringed the Constitution, it becomes not only the
right but in fact the duty of the judiciary to
_______________
12 Section 1, Article VIII, 1987 Constitution.

13 Bondoc v. Pineda, 201 SCRA 792 (1991); Osmeña v.
COMELEC, 199 SCRA 750 (1991).
14 G.R. No. 118295, May 2, 1997.
348

settle the dispute. The question thus posed is

judicial rather than political. The duty to adjudicate
remains to assure that the supremacy of the
Constitution is upheld. Once a controversy as to the
application or interpretation of a constitutional
provision is raised before this Court, it becomes a
legal issue which the Court is bound by
constitutional mandate to decide.”
Even a sideglance at the petitions will reveal
that petitioners have raised constitutional
issues which deserve the resolution of this
Court in view of their seriousness and their
value as precedents. Our statement of facts and
definition of issues clearly show that
petitioners are assailing R.A. No. 8180 because
its provisions infringe the Constitution and not
because the law lacks wisdom. The principle of
separation of power mandates that challenges
on the constitutionality of a law should be
resolved in our courts of justice while doubts on
the wisdom of a law should be debated in the
halls of Congress. Every now and then, a law
may be denounced in court both as bereft of
wisdom and constitutionality infirmed. Such
denunciation will not deny this Court of its
jurisdiction to resolve the constitutionality of
the said law while prudentially refusing to pass
on its wisdom.
The effort of respondents to question the
locus standi of petitioners must also fall on
barren ground. In language too lucid to be
misunderstood, this Court has brightlined its
liberal stance on a petitioner’s locus standi
where the petitioner is able to craft an issue
15
of
transcendental significance to the people. In
Kapatiran ng mga Naglilingkod 16 sa
Pamahalaan ng Pilipinas, Inc. v. Tan, we
stressed:
“x x x
Objections to taxpayers’ suit for lack of sufficient
personality, standing or interest are, however, in the
main procedural matters.
____________________________
15 Garcia v. Executive Secretary, 211 SCRA 219 (1992); Osmeña

v. COMELEC, 199 SCRA 750 (1991); Basco v. Pagcor, 197 SCRA
52 (1991); Daza v. Singson, 180 SCRA 496 (1989); Araneta v.
Dinglasan, 84 Phil. 368 (1949).
16 163 SCRA 371 (1988).
349
VOL. 281, NOVEMBER 5, 1997 349

Considering the importance to the public of the cases

at bar, and in keeping with the Court’s duty, under
the 1987 Constitution, to determine whether or not
the other branches of government have kept
themselves within the limits of the Constitution and
the laws and that they have not abused the
discretion given to them, the Court has brushed
aside technicalities of procedure and has taken
cognizance of these petitions.”
There is not a dot of disagreement between the

petitioners and the respondents on the far
reaching importance of the validity of RA No.
8180 deregulating our downstream oil industry.
Thus, there is no good sense in being
hypertechnical on the standing of petitioners
for they pose issues which are significant to our
people and which deserve our forthright
resolution.
We shall now track down the substantive
issues. In G.R. No. 124360 where petitioner is
Senator Tatad, it is contended that section 5(b)
of R.A. No. 8180
17
on tariff differential violates
the provision of the Constitution requiring
every law to have only one subject which
should be expressed in its title. We do not
concur with this contention. As a policy, this
Court has adopted a liberal construction of the
one title—one 18subject rule. We have
consistently ruled that the title need not
mirror, fully index or catalogue all contents and
minute details of a law. A law having a single
general subject indicated in the title may
contain any number of provisions, no matter
how diverse they may be, so long as they are
not inconsistent with or foreign to the general
subject, and may be considered in furtherance
of such subject by providing for the method19 and
means of carrying out the general subject. We
hold that section 5(b) providing for tariff
differential is germane to the
_______________
17 Section 26(1), Article VI of the 1987 Constitution

provides that “every bill passed by the Congress shall
embrace only one subject which shall be expressed in the
title thereof.”
18 Tobias v. Abalos, 239 SCRA 106 (1994); Philippine
Judges Association v. Prado, 227 SCRA 703 (1993);
Lidasan v. COMELEC, 21 SCRA 496 (1967).
19 Tio v. Videogram Regulatory Board, 151 SCRA 208
(1987).
350

ANNOTATED
Energy
subject of R.A. No. 8180 which is the

The section is supposed to sway prospective
investors to put up refineries in our country
and make20 them rely less on imported
petroleum. We shall, however, return to the
validity of this provision when we examine its
blocking effect on new entrants to the oil
market.
We shall now slide to the substantive issues
in G.R. No. 127867. Petitioners assail section
15 of R.A. No. 8180 which fixes the time frame
for the full deregulation of the downstream oil
industry. We restate its pertinent portion for
emphasis, viz.:
“Sec. 15. Implementation of Full Deregulation—

Pursuant to section 5(e) of Republic Act No. 7638,
the DOE shall, upon approval of the President,
implement the full deregulation of the downstream
oil industry not later than March 1997. As far as
is stable . . .”
Petitioners urge that the phrases “as far as

practicable,” “decline of crude oil prices in the
world market” and “stability of the peso
exchange rate to the US dollar” are ambivalent,
unclear and inconcrete in meaning. They
submit that they do not provide the
“determinate or determinable standards” which
can guide the President in his decision to fully
deregulate the downstream oil industry. In
addition, they contend that E.O. No. 392 which
advanced the date of full deregulation is void
for it illegally considered the depletion of the
OPSF fund as a factor.
The power of Congress to delegate the
execution of laws has long been settled by this
Court. As early as 1916 in Compania General
de Tabacos de Filipinas vs. The Board of Public
_______________
20 Journal of the House of Representatives, December
13, 1995, p. 32.
351
VOL. 281, NOVEMBER 5, 1997 351

Energy
21
Utility Commissioners, this Court thru, Mr.
Justice Moreland, held that “the true
distinction is between the delegation of power
to make the law, which necessarily involves a
discretion as to what it shall be, and conferring
authority or discretion as to its execution, to be
exercised under and in pursuance of the law.
The first cannot be done; to the latter no valid
objection can be made.” Over the years, as the
legal engineering of men’s relationship became
more difficult, Congress has to rely more on the
practice of delegating the execution of laws to
the executive and other administrative
agencies. Two tests have been developed to
determine whether the delegation of the power
to execute laws does not involve the abdication
of the power to make law itself. We delineated
the metes and bounds of these22tests in Eastern
Shipping Lines, Inc. vs. POEA, thus:
“There are two accepted tests to determine whether

or not there is a valid delegation of legislative power,
viz: the completeness test and the sufficient
standard test. Under the first test, the law must be
complete in all its terms and conditions when it
leaves the legislative such that when it reaches the
delegate the only thing he will have to do is to
enforce it. Under the sufficient standard test, there
must be adequate guidelines or limitations in the
law to map out the boundaries of the delegate’s
authority and prevent the delegation from running
riot. Both tests are intended to prevent a total
transference of legislative authority to the delegate,
who is not allowed to step into the shoes of the
legislature and exercise a power essentially
legislative.”
The validity of delegating legislative power is

now a quiet area in our constitutional
landscape. As sagely observed, delegation of
legislative power has become an inevitability in
light of the increasing complexity of the task of
government. Thus, courts bend as far back as
possible to sustain the constitutionality of laws
which are assailed as unduly delegating
_______________
21 34 Phil. 136 citing Cincinnati, W. & Z. R.R. Co. vs.

Clinton Country Commrs. (1 Ohio St. 77).
22 166 SCRA 533, 543-544.
352
SUPREME COURT REPORTS 352

ANNOTATED
Energy
legislative powers.
23
Citing Hirabayashi v.
United States as authority, Mr. Justice
Isagani A. Cruz states “that even if the law
does not expressly pinpoint the standard, the
courts will bend over backward to locate the
same elsewhere in order to spare the24statute, if
it can, from constitutional infirmity.”
Given the groove of the Court’s rulings, the
attempt of petitioners to strike down section 15
on the ground of undue delegation of legislative
power cannot prosper. Section 15 can hurdle
both the completeness test and the sufficient
standard test. It will be noted that Congress
expressly provided in R.A. No. 8180 that full
deregulation will start at the end of March
1997, regardless of the occurrence of any event.
Full deregulation at the end of March 1997 is
mandatory and the Executive has no discretion
to postpone it for any purported reason. Thus,
the law is complete on the question of the final
date of full deregulation. The discretion given
to the President is to advance the date of full
deregulation before the end of March 1997.
Section 15 lays down the standard to guide the
judgment of the President—he is to time it as
far as practicable when the prices of crude oil
and petroleum products in the world market
are declining and when the exchange rate of
the peso in relation to the US dollar is stable.
Petitioners contend that the words “as far as
practicable,” “declining” and “stable” should
have been defined in R.A. No. 8180 as they do
not set determinate or determinable standards.
The stubborn submission deserves scant
consideration. The dictionary meanings of
these words are well settled and cannot confuse
men of reasonable intelligence. Webster defines
“practicable” as meaning possible to practice or
perform, “decline” as meaning to take a
downward direction, 25
and “stable” as meaning
firmly established. The fear of petitioners that
these words will result in the exercise of
executive discretion that will run riot is thus
groundless. To be sure, the
_______________
23 320 US 99.
24 Philippine Political Law, 1995 ed., p. 99.
25 Webster, New Third International Dictionary, 1993
ed., pp. 1780, 586 and 2218.
353
VOL. 281, NOVEMBER 5, 1997 353

Energy
Court has sustained the validity of similar, 26

if
not more general standards in other cases.
It ought to follow that the argument that
E.O. No. 392 is null and void as it was based on
indeterminate standards set by R.A. 8180 must
likewise fail. If that were all the attack against
the validity of E.O. No. 392, the issue need not
further detain our discourse. But petitioners
further posit the thesis that the Executive
misapplied R.A. No. 8180 when it considered
the depletion of the OPSF fund as a factor in
fully deregulating the downstream oil industry
in February 1997. A perusal of section 15 of
R.A. No. 8180 will readily reveal that it only
enumerated two factors to be considered by the
Department of Energy and the Office of the
President, viz.: (1) the time when the prices of
crude oil and petroleum products in the world
market are declining, and (2) the time when
the exchange rate of the peso in relation to the
US dollar is stable. Section 15 did not mention
the depletion of the OPSF fund as a factor to be
given weight by the Executive before ordering
full deregulation. On the contrary, the debates
in Congress will show that some of our
legislators wanted to impose as a pre-condition
to deregulation a showing
27
that the OPSF fund
must not be in deficit. We therefore hold that
the Executive department failed to follow
faithfully the standards set by R.A. No. 8180
when it considered the extraneous factor of
depletion of the OPSF fund. The
misappreciation of this extra factor cannot be
justified on the ground that the Executive
department considered anyway the stability of
the prices of crude oil in the world market and
the stability of the exchange rate of the peso to
the dollar. By considering another factor to
hasten full deregulation, the Executive
department rewrote the standards set forth in
R.A. 8180. The Executive is
_______________
26 See e.g., Balbuena v. Secretary of Education, 110 Phil.

150 used the standard “simplicity and dignity.” People v.
Rosenthal, 68 Phil. 328 (“public interest”); Calalang v.
Williams, 70 Phil. 726 (“public welfare”); Rubi v. Provincial
Board of Mindoro, 39 Phil. 669 (“interest of law and
order”).
27 See for example TSN of the Session of the Senate on
November 14, 1995, p. 19, view of Senator Gloria M.
Arroyo.
354

ANNOTATED
Energy
bereft of any right to alter either by subtraction

or addition the standards set in R.A. No. 8180
for it has no power to make laws. To cede to the
Executive the power to make law is to invite
tyranny, indeed, to transgress the principle of
separation of powers. The exercise of delegated
power is given a strict scrutiny by courts for the
delegate is a mere agent whose action cannot
infringe the terms of agency. In the cases at
bar, the Executive co-mingled the factor of
depletion of the OPSF fund with the factors of
decline of the price of crude oil in the world
market and the stability of the peso to the US
dollar. On the basis of the text of E.O. No. 392,
it is impossible to determine the weight given
by the Executive department to the depletion of
the OPSF fund. It could well be the principal
consideration for the early deregulation. It
could have been accorded an equal significance.
Or its importance could be nil. In light of this
uncertainty, we rule that the early
deregulation under E.O. No. 392 constitutes a
misapplication of R.A. No. 8180.
We now come to grips with the contention
that some provisions of R.A. No. 8180 violate
section 19 of Article XII of the 1987
Constitution. These provisions are:
(1) Section 5(b) which states—“Any law to

the contrary notwithstanding and
starting with the effectivity of this Act,
tariff duty shall be imposed and
collected on imported crude oil at the
rate of three percent (3%) and imported
refined petroleum products at the rate
of seven percent (7%) except fuel oil and
LPG, the rate for which shall be the
same as that for imported crude oil.
Provided, that beginning on January 1,
2004 the tariff rate on imported crude
oil and refined petroleum products shall
be the same. Provided, further, that
this provision may be amended only by
an Act of Congress.”
(2) Section 6 which states—“To ensure the
security and continuity of petroleum
crude and products supply, the DOE
shall require the refiners and importers
to maintain a minimum inventory
equivalent to ten percent (10%) of their
respective annual sales volume or forty
(40) days of supply, whichever is lower,”
and
(3) Section 9(b) which states—“To ensure
fair competition and prevent cartels and
monopolies in the downstream oil
industry, the following acts shall be
prohibited:
xxx
355
VOL. 281, NOVEMBER 5, 1997 355

Energy
(b) Predatory pricing which means selling

or offering to sell any product at a price
unreasonably below the industry
average cost so as to attract customers
to the detriment of com-petitors.”
On the other hand, section 19 of Article XII of

the Constitution allegedly violated by the
aforestated provisions of R.A. No. 8180
mandates: “The State shall regulate or prohibit
monopolies when the public interest so
requires. No combinations in restraint of trade
or unfair competition shall be allowed.”
A monopoly is a privilege or peculiar
advantage vested in one or more persons or
companies, consisting in the exclusive right or
power to carry on a particular business or
trade, manufacture a particular article, or
control the sale or the whole supply of a
particular commodity. It is a form of market
structure in which one or only a few firms
dominate 28
the total sales of a product or
service. On the other hand, a combination in
restraint of trade is an agreement or
understanding between two or more persons, in
the form of a contract, trust, pool, holding
company, or other form of association, for the
purpose of unduly restricting competition,
monopolizing trade and commerce in a certain
commodity, controlling its production,
distribution and price, or otherwise interfering
with freedom29
of trade without statutory
authority. Combination in restraint of trade
refers to30 the means while monopoly refers to
the end.
Article 186 of the Revised Penal Code and
Article 28 of the New Civil Code breathe life to
this constitutional policy. Article 186 of the
Revised Penal Code penalizes monopolization
and creation
31
of combinations in restraint of
trade, while
_______________
28 Black’s Law Dictionary, 6th edition, p. 1007.

29 Id., p. 266.
30 54 Am Jur 2d 669.
31 Art. 186. Monopolies and combinations in restraint of
trade.—The penalty of prision correccional in its minimum
period or a fine ranging from 200 to 6,000 pesos, or both,
shall be imposed upon: 1. Any person who shall enter into
any contract or agreement or shall take part in any
conspiracy or combination in the form of a
356
ANNOTATED
Energy
Article 28 of the New Civil Code makes any

person who shall engage
32
in unfair competition
liable for damages.
_______________
trust or otherwise, in restraint of trade or commerce to

prevent by artificial means free competition in the market.
2. Any person who shall monopolize any merchandise or
object of trade or commerce, or shall combine with any
other person or persons to monopolize said merchandise or
object in order to alter the price thereof by spreading false
rumors or making use of any other article to restrain free
competition in the market;
3. Any person who, being a manufacturer, producer, or
processor of any merchandise or object of commerce or an
importer of any merchandise or object of commerce from
any foreign country, either as principal or agent,
wholesaler or retailer, shall combine, conspire or agree in
any manner with any person likewise engaged in the
manufacture, production, processing, assembling or
importation of such merchandise or object of commerce or
with any other persons not so similarly engaged for the
purpose of making transactions prejudicial to lawful
commerce, or of increasing the market price in any part of
the Philippines, or any such merchandise or object of
commerce manufactured, produced, or processed,
assembled in or imported into the Philippines, or of any
article in the manufacture of which such manufactured,
produced, processed, or imported merchandise or object of
commerce is used.
If the offense mentioned in this article affects any food
substance, motor fuel or lubricants, or other articles of
prime necessity the penalty shall be that of prision mayor
in its maximum and medium periods, it being sufficient for
the imposition thereof that the initial steps have been
taken toward carrying out the purposes of the combination.
xxx
Whenever any of the offenses described above is
committed by a corporation or association, the president
and each one of the directors or managers of said
corporation or association, who shall have knowingly
permitted or failed to prevent the commission of such
offenses, shall be held liable as principals thereof.
32 Art. 28. Unfair competition in agricultural,
commercial or industrial enterprises or in labor through
the use of force, intimidation, deceit, machination or any
other unjust, oppressive or high-handed method shall give
rise to a right of action by the person who thereby suffers
damage.
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Energy
Respondents aver that sections 5(b), 6 and 9(b)

implement the policies and objectives of R.A.
No. 8180. They explain that the 4% tariff
differential is designed to encourage new
entrants to invest in refineries. They stress
that the inventory requirement is meant to
guaranty continuous domestic supply of
petroleum and to discourage fly-by-night
operators. They also submit that the
prohibition against predatory pricing is
intended to protect prospective entrants.
Respondents manifested to the Court that new
players have entered the Philippines after
deregulation and have now captured 3%-5% of
the oil market.
The validity of the assailed provisions of
R.A. No. 8180 has to be decided in light of the
letter and spirit of our Constitution, especially
section 19, Article XII. Beyond doubt, the
Constitution committed us to the free
enterprise system but it is system impressed
with its own distinctness. Thus, while the
Constitution embraced free enterprise as an
economic creed, it did not prohibit per se the
operation of monopolies which can,
33
however, be
regulated in the public interest. Thus too, our
free enterprise system is not based on a market
of pure and unadulterated competition where
the State pursues a strict hands-off policy and
follows the let-the-devil devour the hindmost
rule. Combinations in restraint of trade and
unfair competitions are absolutely proscribed
and the proscription is directed both against
34
the State as well as the private sector. This
distinct free enterprise system is dictated by
the need to achieve the goals of our national
economy as defined by section 1, Article XII of
the Constitution which are: more equitable
distribution of opportunities, income and
wealth; a sustained increase in the amount of
goods and services produced
_______________
33 Bernas, The Intent of the 1986 Constitution Writers

(1995), p. 877; Philippine Long Distance Telephone Co. v.
National Telecommunications Commission, 190 SCRA 717
(1990); Northern Cement Corporation v. Intermediate
Appellate Court, 158 SCRA 408 (1988); Philippine Ports
Authority v. Mendoza, 138 SCRA 496 (1985); Anglo-Fil
Trading Corporation v. Lazaro, 124 SCRA 494 (1983).
34 Record of the Constitutional Commission, Volume III,
p. 258.
358

ANNOTATED
Energy
by the nation for the benefit of the people; and

an expanding productivity as the key to raising
the quality of life for all, especially the
underprivileged. It also calls for the State to
protect Filipino enterprises against unfair
competition and trade practices.
Section 19, Article XII of our Constitution is
anti-trust in history and in spirit. It espouses
competition. The desirability of competition is
the reason for the prohibition against restraint
of trade, the reason for the interdiction of
unfair competition, and the reason for
regulation of unmitigated monopolies.
Competition is thus the underlying principle of
section 19, Article XII of our Constitution
which cannot be violated by R.A. No. 8180. We
subscribe to the observation of Prof. Gellhorn
that the objective of anti-trust law is “to assure
a competitive economy, based upon the belief
that through competition producers will strive
to satisfy consumer wants at the lowest price
with the sacrifice of the fewest resources.
Competition among producers allows
consumers to bid for goods and services, and
thus matches their 35 desires with society’s
opportunity costs.” He adds with
appropriateness that there is a reliance upon
“the operation of the ‘market’ system (free
enterprise) to decide what shall be produced,
how resources shall be allocated in the
production process, and to whom the various
products will be distributed. The market
system relies on the consumer to decide what
and how much shall be produced, and on
competition, among producers to determine
who will manufacture it.”
Again, we underline in scarlet that the
fundamental principle espoused by section 19,
Article XII of the Constitution is competition
for it alone can release the creative forces of the
market. But the competition that can unleash
these creative forces is competition that is
fighting yet is fair. Ideally, this kind of
competition requires the presence of not one,
not just a few but several players. A market
controlled by one player (monopoly) or
dominated by a handful of players (oligopoly) is
_______________
35 Gellhorn, Anti Trust Law and Economics in a

Nutshell, 1986 ed., p. 45.
359
VOL. 281, NOVEMBER 5, 1997 359

Energy
hardly the market where honest-to-goodness

competition will prevail. Monopolistic or
oligopolistic markets deserve our careful
scrutiny and laws which barricade the entry
points of new players in the market should be
viewed with suspicion.
Prescinding from these baseline
propositions, we shall proceed to examine
whether the provisions of R.A. No. 8180 on
tariff differential, inventory reserves, and
predatory prices imposed substantial barriers
to the entry and exit of new players in our
downstream oil industry. If they do, they have
to be struck down for they will necessarily
inhibit the formation of a truly competitive
market. Contrariwise, if they are insignificant
impediments, they need not be stricken down.
In the cases at bar, it cannot be denied that
our downstream oil industry is operated and
controlled by an oligopoly, a foreign oligopoly at
that. Petron, Shell and Caltex stand as the only
major league players in the oil market. All
other players belong to the lilliputian league.
As the dominant players, Petron, Shell and
Caltex boast of existing refineries of various
capacities. The tariff differential of 4%
therefore works to their immense benefit. Yet,
this is only one edge of the tariff differential.
The other edge cuts and cuts deep in the heart
of their competitors. It erects a high barrier to
the entry of new players. New players that
intend to equalize the market power of Petron,
Shell and Caltex by building refineries of their
own will have to spend billions of pesos. Those
who will not build refineries but compete with
them will suffer the huge disadvantage of
increasing their product cost by 4%. They will
be competing on an uneven field. The argument
that the 4% tariff differential is desirable
because it will induce prospective players to
invest in refineries puts the cart before the
horse. The first need is to attract new players
and they cannot be attracted by burdening
them with heavy disincentives. Without new
players belonging to the league of Petron, Shell
and Caltex, competition in our downstream oil
industry is an idle dream.
The provision on inventory widens the
balance of advantage of Petron, Shell and
Caltex against prospective new players. Petron,
Shell and Caltex can easily comply with the
360

ANNOTATED
Energy
inventory requirement of R.A. No. 8180 in view

of their existing storage facilities. Prospective
competitors again will find compliance with
this requirement difficult as it will entail a
prohibitive cost. The construction cost of
storage facilities and the cost of inventory can
thus scare prospective players. Their net effect
is to further occlude the entry points of new
players, dampen competition and enhance the
control of the market by the three (3) existing
oil companies.
Finally, we come to the provision on
predatory pricing which is defined as “x x x
selling or offering to sell any product at a price
unreasonably below the industry average cost
so as to attract customers to the detriment of
competitors.” Respondents contend that this
provision works against Petron, Shell and
Caltex and protects new entrants. The ban on
predatory pricing cannot be analyzed in
isolation. Its validity is interlocked with the
barriers imposed by R.A. No. 8180 on the entry
of new players. The inquiry should be to
determine whether predatory pricing on the
part of the dominant oil companies is
encouraged by the provisions in the law
blocking the36entry of new players. Text-writer
Hovenkamp, gives the authoritative answer
and we quote:
“x x x
“The rationale for predatory pricing is the
sustaining of losses today that will give a firm
monopoly profits in the future. The monopoly profits
will never materialize, however, if the market is
flooded with new entrants as soon as the successful
predator attempts to raise its price. Predatory
pricing will be profitable only if the market contains
significant barriers to new entry.”
As aforediscussed, the 4% tariff differential and

the inventory requirement are significant
barriers which discourage new players to enter
the market. Considering these significant
barriers established by R.A. No. 8180 and the
lack of players with the comparable clout of
PETRON, SHELL and CALTEX, the
temptation for a dominant player to engage in
predatory
_______________
36 Economics and Federal Anti-Trust Law, Hornbook

Series, Student ed., 1985 ed., p. 181.
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Energy
pricing and succeed is a chilling reality.

Petitioners’ charge that this provision on
predatory pricing is anti-competitive is not
without reason.
Respondents belittle these barriers with the
allegation that new players have entered the
market since deregulation. A scrutiny of the
list of the alleged new players will, however,
reveal that not one belongs to the class and
category of PETRON, SHELL and CALTEX.
Indeed, there is no showing that any of these
new players intends to install any refinery and
effectively compete with these dominant oil
companies. In any event, it cannot be gainsaid
that the new players could have been more in
number and more impressive in might if the
illegal entry barriers in R.A. No. 8180 were not
erected.
We come to the final point. We now resolve
the total effect of the untimely deregulation, the
imposition of 4% tariff differential on imported
crude oil and refined petroleum products, the
requirement of inventory and the prohibition
on predatory pricing on the constitutionality of
R.A. No. 8180. The question is whether these
offending provisions can be individually struck
down without invalidating the entire R.A. No.
8180. The ruling 37
case law is well stated by
author Agpalo, viz.:
“x x x
The general rule is that where part of a statute is
void as repugnant to the Constitution, while another
part is valid, the valid portion, if separable from the
invalid, may stand and be enforced. The presence of
a separability clause in a statute creates the
presumption that the legislature intended
separability, rather than complete nullity of the
statute. To justify this result, the valid portion must
be so far independent of the invalid portion that it is
fair to presume that the legislature would have
enacted it by itself if it had supposed that it could
not constitutionaly enact the other. Enough must
remain to make a complete, intelligible and valid
statute, which carries out the legislative intent. x x x
The exception to the general rule is that when the
parts of a statute are so mutually dependent and
connected, as conditions,
_______________
37 Statutory Construction, 1986 ed., pp. 28-29.
362

considerations, inducements, or compensations for

each other, as to warrant a belief that the legislature
intended them as a whole, the nullity of one part will
vitiate the rest. In making the parts of the statute
dependent, conditional, or connected with one
another, the legislature intended the statute to be
carried out as a whole and would not have enacted it
if one part is void, in which case if some parts are
unconstitutional, all the other provisions thus
dependent, conditional, or connected must fall with
them.”
R.A. No. 8180 contains a separability clause.

Section 23 provides that “if for any reason, any
section or provision of this Act is declared
unconstitutional or invalid, such parts not
affected thereby shall remain in full force and
effect.” This separability clause
notwithstanding, we hold that the offending
provisions of R.A. No. 8180 so permeate its
essence that the entire law has to be struck
down. The provisions on tariff differential,
inventory and predatory pricing are among the
principal props of R.A. No. 8180. Congress
could not have deregulated the downstream oil
industry without these provisions.
Unfortunately, contrary to their intent, these
provisions on tariff differential, inventory and
predatory pricing inhibit fair competition,
encourage monopolistic power and interfere
with the free interaction of market forces. R.A.
No. 8180 needs provisions to vouchsafe free and
fair competition. The need for these
vouchsafing provisions cannot be overstated.
Before deregulation, PETRON, SHELL and
CALTEX had no real competitors but did not
have a free run of the market because
government controls both the pricing and non-
pricing aspects of the oil industry. After
deregulation, PETRON, SHELL and CALTEX
remain unthreatened by real competition yet
are no longer subject to control by government
with respect to their pricing and non-pricing
decisions. The aftermath of R.A. No. 8180 is a
deregulated market where competition can be
corrupted and where market forces can be
manipulated by oligopolies.
The fall out effects of the defects of R.A. No.
8180 on our people have not escaped Congress.
A lot of our leading legislators have come out
openly with bills seeking the repeal of these
odious and offensive provisions in R.A. No.
8180. In the
363
VOL. 281, NOVEMBER 5, 1997 363

Energy
Senate, Senator Freddie Webb has filed S.B.

No. 2133 which is the result of the hearings
conducted by the Senate Committee on Energy.
The hearings revealed that (1) there was a need
to level the playing field for the new entrants in
the downstream oil industry, and (2) there was
no law punishing a person for selling petroleum
products at unreasonable prices. Senator
Alberto G. Romulo also filed S.B. No. 2209
abolishing the tariff differential beginning
January 1, 1998. He declared that the
amendment “x x x would mean that instead of
just three (3) big oil companies there will be
other major oil companies to provide more
competitive prices for the market and the
consuming public.” Senator Heherson T.
Alvarez, one of the principal proponents of R.A.
No. 8180, also filed S.B. No. 2290 increasing
the penalty for violation of its section 9. It is his
opinion as expressed in the explanatory note of
the bill that the present oil companies are
engaged in cartelization despite R.A. No. 8180,
viz.:
“x x x
“Since the downstream oil industry was fully
deregulated in February 1997, there have been eight
(8) fuel price adjustments made by the three oil
majors, namely: Caltex Philippines, Inc.; Petron
Corporation; and Pilipinas Shell Petroleum
Corporation. Very noticeable in the price
adjustments made, however, is the uniformity in the
pump prices of practically all petroleum products of
the three oil companies. This, despite the fact, that
their selling rates should be determined by a
combination of any of the following factors: the
prevailing peso-dollar exchange rate at the time
payment is made for crude purchases, sources of
crude, and inventory levels of both crude and refined
petroleum products. The abovestated factors should
have resulted in different, rather than identical
prices.
The fact that the three (3) oil companies’ petroleum
products are uniformly priced suggests collusion,
amounting to cartelization, among Caltex
Philippines, Inc., Petron Corporation, and Pilipinas
Shell Petroleum Corporation to fix the prices of
petroleum products in violation of paragraph(a),
Section 9 of R.A. No. 8180.
To deter this pernicious practice and to assure
that present and prospective players in the
downstream oil industry conduct their
364

business with conscience and propriety, cartel-like

activities ought to be severely penalized.”
Senator Francisco S. Tatad also filed S.B. No.

2307 providing for a uniform tariff rate on
imported crude oil and refined petroleum
products. In the explanatory note of the bill, he
declared in no uncertain terms that “x x x the
present set-up has raised serious public concern
over the way the three oil companies have
uniformly adjusted the prices of oil in the
country, an indication of a possible existence of
a cartel or a cartel-like situation within the
downstream oil industry. This situation is
mostly attributed to the foregoing provision on
tariff differential, which has effectively
discouraged the entry of new players in the
downstream oil industry.”
In the House of Representatives, the moves to
rehabilitate R.A. No. 8180 are equally feverish.
Representative Leopoldo E. San Buenaventura
has filed H.B. No. 9826 removing the tariff
differential for imported crude oil and imported
refined petroleum products. In the explanatory
note of the bill, Rep. Buenaventura explained:
“x x x
As we now experience, this difference in tariff
rates between imported crude oil and imported
refined petroleum products, unwittingly provided a
built-in-advantage for the three existing oil refineries
in the country and eliminating competition which is
a must in a free enterprise economy. Moreover, it
created a disincentive for other players to engage
even initially in the importation and distribution of
refined petroleum products and ultimately in the
putting up of refineries. This tariff differential
virtually created a monopoly of the downstream oil
industry by the existing three oil companies as
shown by their uniform and capricious pricing of
their products since this law took effect, to the great
disadvantage of the consuming public.
Thus, instead of achieving the desired effects of
deregulation, that of free enterprise and a level
playing field in the downstream oil industry, R.A.
8180 has created an environment conducive to
cartelization, unfavorable, increased, unrealistic
prices of petroleum products in the country by the
three existing refineries.”
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Energy
Representative Marcial C. Punzalan, Jr., filed

H.B. No. 9981to prevent collusion among the
present oil companies bystrengthening the
oversight function of the government,
particularly its ability to subject to a review
any adjustment inthe prices of gasoline and
other petroleum products. In theexplanatory
note of the bill, Rep. Punzalan, Jr., said:
“x x x
To avoid this, the proposed bill seeks to strengthen
the oversight function of government, particularly its
ability to review the prices set for gasoline and other
petroleum products. It grants the Energy Regulatory
Board (ERB) the authority to review prices of oil and
other petroleum products, as may be petitioned by a
person, group or any entity, and to subsequently
compel any entity in the industry to submit any and
all documents relevant to the imposition of new
prices. In cases where the Board determines that
there exist collusion, economic conspiracy, unfair
trade practice, profiteering and/or overpricing, it
may take any step necessary to protect the public,
including the readjustment of the prices of petroleum
products. Further, the Board may also impose the
fine and penalty of imprisonment, as prescribed in
Section 9 of R.A. 8180, on any person or entity from
the oil industry who is found guilty of such
prohibited acts.
By doing all of the above, the measure will
effectively provide Filipino consumers with a venue
where their grievances can be heard and
immediately acted upon by government.
Thus, this bill stands to benefit the Filipino
consumer by making the price-setting process more
transparent and making it easier to prosecute those
who perpetrate such prohibited acts as collusion,
overpricing, economic conspiracy and unfair trade.”
Representative Sergio A.F. Apostol filed H.B.

No. 10039 to remedy an omission in R.A. No.
8180 where there is no agency in government
that determines what is “reasonable” increase
in the prices of oil products. Representative
Dante O. Tinga, one of the principal sponsors of
R.A. No. 8180, filed H.B. No. 10057 to
strengthen its anti-trust provisions. He
elucidated in its explanatory note:
“x x x
The definition of predatory pricing, however,
needs to be tightened up particularly with respect to
the definitive benchmark price
366

and the specific anti-competitive intent. The

definition in the bill at hand which was taken from
the Areeda-Turner test in the United States on
predatory pricing resolves the questions. The
definition reads, ‘Predatory pricing means selling or
offering to sell any oil product at a price below the
average variable cost for the purpose of destroying
competition, eliminating a competitor or
discouraging a competitor from entering the market.’
The appropriate actions which may be resorted to
under the Rules of Court in conjunction with the oil
deregulation law are adequate. But to stress their
availability and dynamism, it is a good move to
incorporate all the remedies in the law itself. Thus,
the present bill formalizes the concept of government
intervention and private suits to address the
problem of antitrust violations. Specifically, the
government may file an action to prevent or restrain
any act of cartelization or predatory pricing, and if it
has suffered any loss or damage by reason of the
antitrust violation it may recover damages.
Likewise, a private person or entity may sue to
prevent or restrain any such violation which will
result in damage to his business or property, and if
he has already suffered damage he shall recover
treble damages. A class suit may also be allowed.
To make the DOE Secretary more effective in the
enforcement of the law, he shall be given additional
powers to gather information and to require reports.”
Representative Erasmo B. Damasing filed H.B.
No. 7885 and has a more unforgiving view of
R.A. No. 8180. He wants it completely repealed.
He explained:
“x x x
Contrary to the projections at the time the bill on
the Downstream Oil Industry Deregulation was
discussed and debated upon in the plenary session
prior to its approval into law, there aren’t any new
players or investors in the oil industry. Thus,
resulting in practically a cartel or monopoly in the
oil industry by the three (3) big oil companies,
Caltex, Shell and Petron. So much so, that with the
deregulation now being partially implemented, the
said oil companies have succeeded in increasing the
prices of most of their petroleum products with little
or no interference at all from the government. In the
month of August, there was an increase of Fifty
centavos (50¢) per liter by subsidizing the same with
the OPSF, this is only temporary as in March 1997,
or a few months from now, there will be full
deregulation (Phase II) whereby the increase in the
367
VOL. 281, NOVEMBER 5, 1997 367

prices of petroleum products will be fully absorbed

by the consumers since OPSF will already be
abolished by then. Certainly, this would make the
lives of our people, especially the unemployed ones,
doubly difficult and unbearable.
The much ballyhooed coming in of new players in
the oil industry is quite remote considering that these
prospective investors cannot fight the existing and
well established oil companies in the country today,
namely, Caltex, Shell and Petron. Even if these new
players will come in, they will still have no chance to
compete with the said three (3) existing big oil
companies considering that there is an imposition of
oil tariff differential of 4% between importation of
crude oil by the said oil refineries paying only 3%
tariff rate for the said importation and 7% tariff rate
to be paid by businessmen who have no oil refineries
in the Philippines but will import finished
petroleum/oil products which is being taxed with 7%
tariff rates.
So, if only to help the many who are poor from
further suffering as a result of unmitigated increase
in oil products due to deregulation, it is a must that
the Downstream Oil Industry Deregulation Act of
1996, or R.A. 8180 be repealed completely.”
Various resolutions have also been filed in the

Senate calling for an immediate and
comprehensive review of R.A. No. 8180 to
prevent the downpour of its ill effects on the
people. Thus, S. Res. No. 574 was filed by
Senator Gloria M. Macapagal entitled
Resolution “Directing the Committee on Energy
to Inquire Into The Proper Implementation of
the Deregulation of the Downstream Oil
Industry and Oil Tax Restructuring As
Mandated Under R.A. Nos. 8180 and 8184, In
Order to Make The Necessary Corrections In
the Apparent Misinterpretation Of The Intent
And Provision Of The Laws And Curb The
Rising Tide Of Disenchantment Among The
Filipino Consumers And Bring About The Real
Intentions And Benefits Of The Said Law.”
Senator Blas P. Ople filed S. Res. No. 664
entitled resolution “Directing the Committee on
Energy To Conduct An Inquiry In Aid Of
Legislation To Review The Government’s Oil
Deregulation Policy In Light Of The Successive
Increases In Transportation, Electricity And
Power Rates, As Well As Of Food And Other
Prime Commodities And Recommend
Appropriate Amendments To Protect The
Consuming Public.” Senator Ople observed:
368

ANNOTATED
Energy
“x x x
WHEREAS, since the passage of R.A. No. 8180,
the Energy Regulatory Board (ERB) has imposed
successive increases in oil prices which has triggered
increases in electricity and power rates,
transportation fares, as well as in prices of food and
other prime commodities to the detriment of our
people, particularly the poor;
WHEREAS, the new players that were expected to
compete with the oil cartel-Shell, Caltex and Petron—
have not come in;
WHEREAS, it is imperative that a review of the
oil deregulation policy be made to consider
appropriate amendments to the existing law such as
an extension of the transition phase before full
deregulation in order to give the competitive market
enough time to develop;
WHEREAS, the review can include the
advisability of providing some incentives in order to
attract the entry of new oil companies to effect a
dynamic competitive market;
WHEREAS, it may also be necessary to defer the
setting up of the institutional framework for full
deregulation of the oil industry as mandated under
Executive Order No. 377 issued by President Ramos
last October 31, 1996 x x x.”
Senator Alberto G. Romulo filed S. Res. No. 769
entitled resolution “Directing the Committees
on Energy and Public Services In Aid Of
Legislation To Assess The Immediate
MediumAnd Long Term Impact of Oil
Deregulation On Oil Prices AndThe Economy.”
Among the reasons for the resolution is
thefinding that “the requirement of a 40-day
stock inventory effectively limits the entry of
other oil firms in the market with
theconsequence that instead of going down oil
prices will rise.”
Parallel resolutions have been filed in the
House of Representatives. Representative Dante
O. Tinga filed H. Res. No. 1311 “Directing The
Committee on Energy To Conduct An Inquiry,
In Aid of Legislation, Into The Pricing Policies
And Decisions Of The Oil Companies Since The
Implementation of Full Deregulation Under the
Oil Deregulation Act (R.A. No. 8180) For the
Purpose of Determining In the Context Of The
Oversight Functions Of Congress Whether The
Conduct Of The Oil Companies, Whether
Singly Or Collectively, Constitutes
Cartelization Which Is A Prohibited Act Under
R.A. No.
369
VOL. 281, NOVEMBER 5, 1997 369

Energy
8180, And What Measures Should Be Taken To

Help Ensure The Successful Implementation Of
The Law In Accordance With Its Letter And
Spirit, Including Recommending Criminal
Prosecution Of the Officers Concerned Of the
Oil Companies If Warranted By The Evidence,
And For Other Purposes.” Representatives
Marcial C. Punzalan, Jr. Dante O. Tinga and
Antonio E. Bengzon III filed H.R. No. 894
directing the House Committee on Energy to
inquire into the proper implementation of the
House Resolution No. 1013 was also filed by
Representatives Edcel C. Lagman, Enrique T.
Garcia, Jr. and Joker P. Arroyo urging the
President to immediately suspend the
implementation of E.O. No. 392.
In recent memory there is no law enacted by
the legislature afflicted with so much
constitutional deformities as R.A. No. 8180.
Yet, R.A. No. 8180 deals with oil, a commodity
whose supply and price affect the ebb and flow
of the lifeblood of the nation. Its shortage of
supply or a slight, upward spiral in its price
shakes our economic foundation. Studies show
that the areas most impacted by the movement
of oil are food manufacture, 38
land transport,
trade, electricity and water. At a time when
our economy is in a dangerous downspin, the
perpetuation of R.A. No. 8180 threatens to
multiply the number of our people with bent
backs and begging bowls. R.A. No. 8180 with its
anti-competition provisions cannot be allowed
by this Court to stand even while Congress is
working to remedy its defects.
The Court, however, takes note of the plea of
PETRON, SHELL and CALTEX to lift our
restraining order to enable them to adjust
upward the price of petroleum and petroleum
products in view of the plummeting value of the
peso. Their plea, however, will now have to be
addressed to the Energy Regulatory Board as
the effect of the declaration of
unconstitutionality of R.A. No. 8180 is to revive
39
the former laws it repealed. The length of our
return to the regime of regula-
_______________
38 IBON Facts and Figures, Vol. 18, No. 7, p. 5, April 15,

1995.
39 Cruz v. Youngberg, 56 Phil. 234 (1931).
370

ANNOTATED
Energy
tion depends on Congress which can fasttrack

the writing of a new law on oil deregulation in
accord with the Constitution.
With this Decision, some circles will chide
the Court for interfering with an economic
decision of Congress. Such criticism is
charmless for the Court is annulling R.A. No.
8180 not because it disagrees with deregulation
as an economic policy but because as cobbled by
Congress in its present form, the law violates
the Constitution. The right call therefor should
be for Congress to write a new oil deregulation
law that conforms with the Constitution and
not for this Court to shirk its duty of striking
down a law that offends the Constitution.
Striking down R.A. No. 8180 may cost losses in
quantifiable terms to the oil oligopolists. But
the loss in tolerating the tampering of our
Constitution is not quantifiable in pesos and
centavos. More worthy of protection than the
supra-normal profits of private corporations is
the sanctity of the fundamental principles of
the Constitution. Indeed when confronted by a
law violating the Constitution, the Court has
no option but to strike it down dead. Lest it is
missed, the Constitution is a covenant that
grants and guarantees both the political and
economic rights of the people. The Constitution
mandates this Court to be the guardian not
only of the people’s political rights but their
economic rights as well. The protection of the
economic rights of the poor and the powerless is
of greater importance to them for they are
concerned more with the exoterics of living and
less with the esoterics of liberty. Hence, for as
long as the Constitution reigns supreme so long
will this Court be vigilant in upholding the
economic rights of our people especially from
the onslaught of the powerful. Our defense of
the people’s economic rights may appear
heartless because it cannot be half-hearted.
IN VIEW WHEREOF, the petitions are
granted. R.A. No. 8180 is declared
unconstitutional and E.O. No. 372 void.
SO ORDERED.
Regalado, Davide, Jr., Romero,

Bellosillo and Vitug, JJ., concur.
Narvasa (C.J.), On official leave.
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Energy
Melo, J., I dissent. Opinion follows.

Kapunan, J., See concurring opinion.
Mendoza, J., In the result.
Francisco, J., See dissenting opinion.
Panganiban, J., See concurring opinion.
SEPARATE OPINION
KAPUNAN, J.:
Lately, the Court has been perceived (albeit

erroneously) to be an unwelcome interloper in
affairs and concerns best left to legislators and
policy-makers. Admittedly, the wisdom of
political and economic decisions are outside the
scrutiny of the Court. However, the political
question doctrine is not some mantra that will
automatically cloak executive orders and laws
(or provisions thereof) with legitimacy. It is this
Court’s bounden duty under Sec. 4(2), Art. VIII
of the 1987 Constitution to decide all cases
involving the constitutionality of laws and
under Sec. 1 of the same article, “to determine
whether or not there has been a grave abuse of
discretion amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the Government.”
In the instant case, petitioners assail the
constitutionality of certain provisions found in
R.A. No. 8180, otherwise known as the
“Downstream Oil Industry Deregulation Act of
1996.” To avoid accusations of undue
interference with the workings of the two other
branches of government, this discussion is
limited to the issue of whether or not the
assailed provisions are germane to the law or
serve the purpose for which it was enacted.
The objective of the deregulation law is quite
simple. As aptly enunciated in Sec. 2 thereof, it
is to “foster a truly competitive market which
can better achieve the social policy objectives of
fair prices and adequate, continuous supply of
environmentally-clean and high quality
petroleum products.”
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Energy
The key, therefore, is free competition which is

commonly defined as:
The act or action of seeking to gain what another is

seeking to gain at the same time and usually under
or as if under fair or equitable rules and
circumstances: a common struggle for the same
object especially among individuals of relatively
equal standing . . . a market condition in which a
large number of independent buyers and sellers
compete for identical commodity, deal freely with
each other, and retain the right of entry and exit
from the market. (Webster’s Third International
Dictionary.)
and in a landscape where our oil industry is

dominated by only three major oil firms, this
translates primarily into the establishment of a
free market conducive to the entry of new and
several oil companies in the business.
Corollarily, it means the removal of any and all
barriers that will hinder the influx of
prospective players. It is a truism in economics
that if there are many players in the market,
healthy competition will ensue and in order to
survive and profit the competitors will try to
outdo each other in terms of quality and price.
The result: better quality products and
competitive prices. In the end, it will be the
public that benefits (which is ultimately the
most important goal of the law). Thus, it is
within this framework that we must determine
the validity of the assailed provisions.
I
The 4% Tariff Differential
Sec. 5. Liberalization of Downstream Oil Industry

and Tariff Treatment.—
x x x.
b) Any law to the contrary notwithstanding and
starting with the effectivity of this Act, tariff duty
at the rate of three percent (3%) and imported
refined petroleum products at the rate of seven
percent (7%), except fuel oil and LPG, the rate for
which shall be the same as that for imported crude
oil: Provided, That beginning on January 1, 2004 the
tariff rate on imported crude oil and refined
petroleum products
373
VOL. 281, NOVEMBER 5, 1997 373

shall be the same: Provided, further, That this

provision may be amended only by an Act of
Congress;
Respondents are one in asserting that the 4%

tariff differential between imported crude oil
and imported refined petroleum products is
intended to encourage the new entrants to put
up their own refineries in the country. The
advantages of domestic refining cannot be
discounted, but we must view this intent in the
proper perspective. The primary purpose of the
deregulation law is to open up the market and
establish free competition. The priority of the
deregulation law, therefore, is to encourage
new oil companies to come in first. Incentives
to encourage the building of local refineries
should be provided after the new oil companies
have entered the Philippine market and are
actively participating therein.
The threshold question therefore is, is the
4% tariff differential a barrier to the entry of
new oil companies in the Philippine market?
It is. Since the prospective oil companies do
not (as yet) have local refineries, they would
have to import refined petroleum products, on
which a 7% tariff duty is imposed. On the other
hand, the existing oil companies already have
domestic refineries and, therefore, only import
crude oil which is taxed at a lower rate of 3%.
Tariffs are part of the costs of production.
Hence, this means that with the 4% tariff
differential (which becomes an added cost) the
prospective players would have higher
production costs compared to the existing oil
companies and it is precisely this factor which
could seriously affect its decision to enter the
market.
Viewed in this light, the tariff differential
between imported crude oil and refined
petroleum products becomes an obstacle to the
entry of new players in the Philippine oil
market. It defeats the purpose of the law and
should thus be struck down.
Public respondents contend that “. . . a
higher tariff rate is not the overriding factor
confronting a prospective trader/importer but,
rather, his ability to generate the desired
internal rate of return (IRR) and net present
value (NPV). In other
374
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Energy
words, if said trader/importer, after some

calculation, finds that he can match the price of
locally refined petroleum products and still
earn the desired profit margin, despite a higher
tariff rate, he will be attracted to embark in
such business. A tariff differential does not per
se make the business of importing 1refined
petroleum product a losing proposition.”
The problem with this rationale, however, is
that it is highly speculative. The opposite may
well hold true. The point is to make the
prospect of engaging in the oil business in the
Philippines appealing, so why create a barrier
in the first place?
There is likewise no merit in the argument
that the removal of the tariff differential will
revive the 10% (for crude oil) and 20% (for
refined petroleum products) tariff rates that
prevailed before the enactment of R.A. No.
8180. What petitioners are assailing is the
tariff differential. Phrased differently, why is
the tariff duty imposed on imported petroleum
products not the same as that imposed on
imported crude oil? Declaring the tariff
differential void is not equivalent to declaring
the tariff itself void. The obvious consequence
thereof would be that imported refined
petroleum products would now be taxed at the
same rate as imported crude oil which R.A. No.
8180 has specifically set at 3%. The old rates
have effectively
2
been repealed by Sec. 24 of the
same law.
II
The Minimum Inventory Requirement and the
Prohibition Against Predatory Pricing
SEC. 6. Security of Supply.—To ensure the security

and continuity of petroleum crude and products
supply, the DOE shall require the refiners and
importers to maintain a minimum inventory
_______________
1 Public respondents’ Comment, G.R. No. 127867, p. 39.

2 SEC. 24. Repealing Clause.—All laws, presidential decrees,
executive orders, issuances, rules and regulations or parts thereof,
which are inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.
375
VOL. 281, NOVEMBER 5, 1997 375

equivalent to ten percent (10%) of their respective

annual sales volume or forty (40) days of supply,
whichever is lower.
x x x.
SEC. 9. Prohibited Acts.—To ensure fair
competition and prevent cartels and monopolies in
the downstream oil industry, the following acts are
hereby prohibited:
x x x.
b) Predatory pricing which means selling or
offering to sell any product at a price unreasonably
below the industry average cost so as to attract
customers to the detriment of competitors.
The same rationale holds true for the two other

assailed provisions in the Oil Deregulation law.
The primordial purpose of the law, I reiterate,
is to create a truly free and competitive market.
To achieve this goal, provisions that show the
possibility, or even the merest hint, of deterring
or impeding the ingress of new blood in the
market should be eliminated outright. I am
confident that our lawmakers can formulate
other measures that would accomplish the
same purpose (insure security and continuity of
petroleum crude products supply and prevent
fly by night operators, in the case of the
minimum inventory requirement, for instance)
but would not have on the downside the effect
of seriously hindering the entry of prospective
traders in the market.
The overriding consideration, which is the
public interest and public benefit, calls for the
levelling of the playing fields for the existing oil
companies and the prospective new entrants.
Only when there are many players in the
market will free competition reign and
economic development begin.
Consequently, Section 6 and Section 9(b) of
R.A. No. 8180 should similarly be struck down.
III
Conclusion
Respondent oil companies vehemently deny the
“cartelization” of the oil industry. Their parallel
business behavior and uniform pricing are the
result of competition, they say, in order to keep
their share of the market. This rationale fares
376

ANNOTATED
Energy
well when oil prices are lowered, i.e., when one
oil company rolls back its prices, the others
follow suit so as not to lose its market. But how
come when one increases its prices the others
likewise follow? Is this competition at work?
Respondent oil companies repeatedly assert
that due to the devaluation of the peso, they
had to increase the prices of their oil products,
otherwise, they would lose, as they have
allegedly been losing specially with the
issuance of a temporary restraining order by
the Court. However, what we have on record
are only the self-serving lamentations of
respondent oil companies. Not one has
presented hard data, independently verified, to
attest to these losses. Mere allegations are not
sufficient but must be accompanied by
supporting evidence. What probably is nearer
the truth is that respondent oil companies will
not make as much profits as they have in the
past if they are not allowed to increase the
prices of their products everytime the value of
the peso slumps. But in the midst of worsening
economic difficulties and hardships suffered by
the people, the very customers who have given
them tremendous profits throughout the years,
is it fair and decent for said companies not to
bear a bit of the burden by foregoing a little of
their profits?
PREMISES CONSIDERED, I vote that
Section 5(b), Section 6 and Section 9(b) of R.A.
No. 8180 be declared unconstitutional.
CONCURRING OPINION
PANGANIBAN, J.:
I concur with the lucid and convincing ponencia
of Mr. Justice Reynato S. Puno. I write to stress
two points:
1. The Issue Is Whether Oil Companies May

Unilaterally Fix Prices, Not Whether This Court
May Interfere in Economic Questions
With the issuance of the status quo order on
October 7, 1997 requiring the three respondent
oil companies—Petron, Shell and Caltex—“to
cease and desist from increasing the
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Energy
prices of gasoline and other petroleum fuel

products for a period of thirty (30) days,” the
Court has been accused of interfering
1
in purely
economic policy matters or, worse, of2
arrogating unto itself price-regulatory powers.
Let it be emphasized that we have no desire—
nay, we have no power—to intervene in, to
change or to repeal the laws of economics, in
the same manner that we cannot and will not
nullify or invalidate the laws of physics or
chemistry.
The issue here is not whether the Supreme
Court may fix the retail prices of petroleum
products. Rather, the issue is whether RA 8180,
the law allowing the oil companies to
unilaterally set, increase or decrease their
prices, is valid or constitutional.
3
Under the Constitution, this Court has—in
appropriate cases—the DUTY, not just the
power, to determine whether a
_______________
1 Consolidated Memorandum of Public Respondents,

dated October 14, 1997.
2 Petron Corporation’s Motion to Lift Temporary
Restraining Order, dated October 9, 1997, p. 16; Pilipinas
Shell Corporation’s Memorandum, dated October 15, 1997,
pp. 36-37.
3 Sections 1 & 5 of Article VIII of the Constitution
provides:
“Sec. 1. x x x
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not
there has been a grave abuse of discretion amounting to lack of or
excess of jurisdiction on the part of any branch or instrumentality
of the Government.”
“Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over x x x petitions for

certiorari, prohibition, mandamus, quo warranto, and
habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or
certiorari, as the law or Rules of Court may provide, final
judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any

treaty, international or executive agree-
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ANNOTATED
Energy
law or a part thereof offends the Constitution

4
and, if so, to annul and set it aside. Because a
serious challenge has been hurled against the
validity of one such law, namely RA 8180—its
critically having been preliminary determined
from the petition, comments, reply and, most
tellingly, the oral argument on September 30,
1997—this Court, in the exercise of its
mandated judicial discretion, issued the status
quo order to prevent the continued enforcement
and implementation of a law that was prima
facie found to be constitutionally infirm.
Indeed, after careful final deliberation, said law
is now ruled to be constitutionally defective
thereby disabling respondent oil companies
from exercising their erstwhile power, granted
by such defective statute, to determine prices
by themselves.
Concededly, this Court has no power to pass
upon the wisdom, merits and propriety of the
acts of its co-equal branches in government.
However, it does have the prerogative to
uphold the Constitution and to strike down and5
annul a law that contravenes the Charter.
From such duty and prerogative, it shall never
shirk or shy away.
By annulling RA 8180, this Court is not
making a policy statement against deregulation.
Quite the contrary, it is simply invalidating a
pseudo deregulation law which in reality
restrains free trade and perpetuates a cartel, an
oligopoly. The Court is merely upholding
constitutional adherence to a truly competitive
economy that releases the creative energy of free
enterprise. It leaves to Congress, as the policy-
setting agency of the government, the speedy
crafting of a genuine, constitutionally justified
oil deregulation law.
_______________
ment, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.
x x x x x x x x x”
4 Osmeña vs. Comelec, 199 SCRA 750, July 30, 1991;

Angara vs. Electoral Commission, 63 Phil. 139, July 15,
1936.
5 Tañada vs. Angara, G.R. No. 118295, May 2, 1997, p.
26.
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Energy
2. Everyone, Rich or Poor, Must Share in the

Burdens of Economic Dislocation
Much has been said and will be said about the
alleged negative effect of this Court’s holding
on the oil giants’ profit and loss statements. We
are not unaware of the disruptive impact of the
depreciating peso on the retail prices of refined
petroleum products. But such price-escalating
consequence adversely affects not merely these
oil companies which occupy hallowed places
among the most profitable corporate behemoths
in our country. In these critical times of
widespread economic dislocations, abetted by
currency fluctuations not entirely of domestic
origin, all sectors of society agonize and suffer.
Thus, everyone, rich or poor, must share in the
burdens of such economic aberrations.
I can understand foreign investors who see
these price adjustments as necessary
consequences of the country’s adherence to the
free market, for that, in the first place, is the
magnet for their presence here.
Understandably, their concern is limited to
bottom lines and market share. But in all these
mega companies, there are also Filipino
entrepreneurs and managers. I am sure there
are patriots among them who realize that, in
times of economic turmoil, the poor and the
underprivileged proportionately suffer more
than any other sector of society. There is a
certain threshold of pain beyond which the
disadvantaged cannot endure. Indeed, it has
been wisely said that “if the rich who are few
will not help the poor who are many, there will
come a time when the few who are filled cannot
escape the wrath of the many who are hungry.”
Kaya’t sa mga kababayan nating kapitalista at
may kapangyarihan, nararapat lamang na
makiisa tayo sa mga walang palad at
mahihirap sa mga araw ng pangangailangan.
Huwag na nating ipagdiinan ang kawalan ng
tubo, o maging ang panandaliang pagkalugi.
At sa mga mangangalakal na ganid at walang
puso: hirap na hirap na po ang ating mga
kababayan. Makonsiyensya naman kayo!
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Energy
DISSENTING OPINION
MELO, J.:
With all due respect to my esteemed colleague,

Mr. Justice Puno, who has, as usual, prepared
a well-written and comprehensive ponencia, I
regret I cannot share the view that Republic
Act No. 8180 should be struck down as violative
of the Constitution.
The law in question, Republic Act No. 8180,
otherwise known as the Downstream Oil
Deregulation Act of 1996, contains, inter alia,
the following provisions which have become the
subject of the present controversy, to wit:
SEC. 5. Liberalization of Downstream Oil Industry

and Tariff Treatment.—
xxx
(b) Any law to the contrary notwithstanding and
starting with the effectivity of this act, tariff duty
at the rate of (3%) and imported refined petroleum
products at the rate of seven percent (7%), except
fuel oil and LPG, the rate for which shall be the
same as that for imported crude oil: Provided, That
beginning on January 1, 2004 the tariff rate on
imported crude oil and refined petroleum products
shall be the same: Provided, further, That this
provision may be amended only by an Act of
Congress. x x x
SEC. 6. Security of Supply.—To ensure the
security and continuity of petroleum crude and
products supply, the DOE shall require the refiners
and importers to maintain a minimum inventory
whichever is lower.
xxx
SEC. 9. Prohibited Acts.—To ensure fair
competition and prevent cartels and monopolies in
the downstream oil industry, the following acts are
hereby prohibited:
xxx
b) Predatory pricing which means selling or
offering to sell any product at a price unreasonably
below the industry average cost so as to attract
customers to the detriment of competitors.
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Energy
xxx
SEC. 15. Implementation of Full Deregulation.—
Pursuant to Section 5(e) of Republic Act No. 7638,
the DOE [Department of Energy] shall, upon
approval of the President, implement the full
deregulation of the downstream oil industry not
later than March 1997. As far as practicable, the
DOE shall time the full deregulation when the prices
of crude oil and petroleum products in the world
market are declining and when the exchange rate of
the peso in relation to the US Dollar is stable. x x x
In G.R. No. 124360, petitioners therein pray

that the aforequoted Section 5(b) be declared
null and void. However, despite its pendency,
President Ramos, pursuant to the above-cited
Section 15 of the assailed law, issued Executive
Order No. 392 on 22 January 1997 declaring
the full deregulation of the downstream oil
industry effective February 8, 1997. A few days
after the implementation of said Executive
Order, the second consolidated petition was
filed (G.R. No. 127867), seeking, inter alia, the
declaration of the unconstitutionality of Section
15 of the law on various grounds.
I submit that the instant consolidated
petitions should be denied. In support of my
view, I shall discuss the arguments of the
parties point by point.
1. The instant petitions do not raise a
justiciable controversy as the issues raised
therein pertain to the wisdom and
reasonableness of the provisions of the assailed
law. The contentions made by petitioners, that
the “imposition of different tariff rates on
imported crude oil and imported refined
petroleum products will not foster a truly
competitive market, nor will it level the playing
fields” and that said imposition “does not
deregulate the downstream oil industry,
instead, it controls the oil industry, contrary to
the avowed policy of the law,” are clearly policy
matters which are within the province of the
political departments of the government. These
submissions require a review of issues that are
in the nature of political questions, hence,
clearly beyond the ambit of judicial inquiry.
A political question refers to a question of
policy or to issues which, under the
Constitution, are to be decided by the
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Energy
people in their sovereign capacity, or in regard

to which full discretionary authority has been
delegated to the legislative or executive branch
of the government. Generally, political
questions are concerned with issues dependent
upon the wisdom, not the legality, of a
particular measure (Tañada vs. Cuenco, 100
Phil. 101 [1957]).
Notwithstanding the expanded judicial
power of this Court under Section 1, Article
VIII of the Constitution, an inquiry on the
above-stated policy matters would delve on
matters of wisdom which are exclusively within
the legislative powers of Congress.
2. The petitioners do not have the necessary
locus standi to file the instant consolidated
petitions. Petitioners Lagman, Arroyo, Garcia,
Tañada, and Tatad assail the constitutionality
of the above-stated laws through the instant
consolidated petitions in their capacity as
members of Congress, and as taxpayers and
concerned citizens. However, the existence of a
constitutional issue in a case does not per se
confer or clothe a legislator with locus standi to
bring suit. In Phil. Constitution Association
(PHILCONSA) v. Enriquez (235 SCRA 506
[1994]), we held that members of Congress may
properly challenge the validity of an official act
of any department of the government only upon
showing that the assailed official act affects or
impairs their rights and prerogatives as
legislators. In Kilosbayan, Inc., et al. vs.
Morato, et al. (246 SCRA 540 [1995]), this
Court further clarified that “if the complaint is
not grounded on the impairment of the power
of Congress, legislators do not have standing to
question the validity of any law or official
action.”
Republic Act No. 8180 clearly does not
violate or impair prerogatives, powers, and
rights of Congress, or the individual members
thereof, considering that the assailed official
act is the very act of Congress itself authorizing
the full deregulation of the downstream oil
industry.
Neither can petitioners sue as taxpayers or
concerned citizens. A condition sine qua non for
the institution of a tax-payer’s suit is an
allegation that the assailed action is an
unconstitutional exercise of the spending
powers of Congress
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VOL. 281, NOVEMBER 5, 1997 383

Energy
or that it constitutes an illegal disbursement of

public funds. The instant consolidated petitions
do not allege that the assailed provisions of the
law amount to an illegal disbursement of public
money. Hence, petitioners cannot, even as
taxpayers or concerned citizens, invoke this
Court’s power of judicial review.
Further, petitioners, including Flag, FDC,
and Sanlakas, can not be deemed proper
parties for lack of a particularized interest or
elemental substantial injury necessary to
confer on them locus standi. The interest of the
person assailing the constitutionality of a
statute must be direct and personal. He must
be able to show, not only that the law is invalid,
but also that he has sustained or is in
immediate danger of sustaining some direct
injury as a result of its enforcement, and not
merely that he suffers thereby in some
indefinite way. It must appear that the person
complaining has been or is about to be denied
some right or privilege to which he is lawfully
entitled or that he is about to be subjected to
some burdens or penalties by reason of the
statute complained of. Petitioners have not
established such kind of interest.
3. Section 5(b) of Republic Act No. 8180 is
not violative of the “one title-one subject” rule
under Section 26(1), Article VI of the
Constitution. It is not required that a provision
of law be expressed in the title thereof as long
as the provision in question is embraced within
the subject expressed in the title of the law.
The “title of a bill does not have to be a
catalogue of its contents and will suffice if the
matters embodied in the text are relevant to
each other and may be inferred from the title.”
(Association of Small Landowners in the Phils.,
Inc. vs. Sec. of Agrarian Reform, 175 SCRA 343
[1989]) An “act having a single general subject,
indicated in the title, may contain any number
of provisions, no matter how diverse they may
be, so long as they are not inconsistent with or
foreign to the general subject, and may be
considered in furtherance of such subject by
providing for the method and means of carrying
out the general object.” (Sinco, Phil. Political
Law, 11th ed., p. 225)
384

ANNOTATED
Energy
The questioned tariff provision in Section 5(b)

was provided as a means to implement the
deregulation of the downstream oil industry
and hence, is germane to the purpose of the
assailed law. The general subject of Republic
Act No. 8180, as expressed in its title, “An Act
Deregulating the Downstream Oil Industry,
and for Other Purposes,” necessarily implies
that the law provides for the means for such
deregulation. One such means is the imposition
of the differential tariff rates which are
provided to encourage new investors as well as
existing players to put up new refineries. The
aforesaid provision is thus germane to, and in
furtherance of, the object of deregulation. The
trend of jurisprudence, ever since Sumulong vs.
COMELEC (73 Phil. 288 [1941]), is to give the
above-stated constitutional requirement a
liberal interpretation. Hence, there is indeed
substantial compliance with said requirement.
Petitioners claim that because the House
version of the assailed law did not impose any
tariff rates but merely set the policy of “zero
differential” and that the Senate version did
not set or fix any tariff, the tariff changes being
imposed by the assailed law was never subject
of any deliberations in both houses nor the
Bicameral Conference Committee. I believe
that this argument is bereft of merit.
The report of the Bicameral Conference
Committee, which was precisely formed to
settle differences between the two houses of
Congress, was approved by members thereof
only after a full deliberation on the conflicting
provisions of the Senate version and the House
version of the assailed law. Moreover, the joint
explanatory statement of said Committee
which was submitted to both houses, explicitly
states that “while sub-paragraph (b) is a
modification, its thrust and style were
patterned after the House’s original sub-
paragraph (b).” Thus, it cannot be denied that
both houses were informed of the changes in
the aforestated provision of the assailed law.
No legislator can validly state that he was not
apprised of the purposes, nature, and scope of
the provisions of the law since the inclusion of
the tariff differential was clearly mentioned in
the Bicameral Conference Committee’s
explanatory note.
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Energy
As regards the power of the Bicameral

Conference Committee to include in its report
an entirely new provision that is neither found
in the House bill or Senate bill, this Court
already upheld such power in Tolentino vs. Sec.
of Finance (235 SCRA 630 [1994]), where we
ruled that the conference committee can even
include an amendment in the nature of a
substitute so long as such amendment is
germane to the subject of the bill before it.
Lastly, in view of the “enrolled bill theory”
pronounced by this Court as early as 1947 in
the case of Mabanag vs. Lopez Vito (78 Phil. 1
[1947]), the duly authenticated copy of the bill,
signed by the proper officers of each house, and
approved by the President, is conclusive upon
the courts not only of its provisions but also of
its due enactment.
4. Section 15 of Republic Act No. 8180 does
not constitute undue delegation of legislative
power. Petitioners themselves admit that said
section provides the Secretary of Energy and
the President with the bases of (1)
“practicability,” (2) “the decline of crude oil
prices in the world market,” and (3) “the
stability of the Peso exchange rate in relation
to the US Dollar,” in determining the effectivity
of full deregulation. To my mind, said bases are
determinate and determinable guidelines,
when examined in the light of the tests for
permissible delegation.
The assailed law satisfies the completeness
test as it is complete and leaves nothing more
for the Executive Branch to do but to enforce
the same. Section 2 thereof expressly provides
that “it shall be the policy of the State to
deregulate the downstream oil industry to
foster a truly competitive market which can
better achieve the social policy objectives of fair
prices and adequate, continuous supply of
environmentally-clean and high-quality
petroleum products.” This provision manifestly
declares the policy to be achieved through the
delegate, that is, the full deregulation of the
downstream oil industry toward the end of full
and free competition. Section 15 further
provides for all the basic terms and conditions
for its execution and thus belies the argument
that the Executive Branch is given complete
liberty to determine whether or not
386

ANNOTATED
Energy
to implement the law. Indeed, Congress did not

only make full deregulation mandatory, but
likewise set a deadline (that is, not later than
March 1997), within which full deregulation
should be achieved.
Congress may validly provide that a statute
shall take effect or its operation shall be
revived or suspended or shall terminate upon
the occurrence of certain events or
contingencies the ascertainment of which may
be left to some official agency. In effect,
contingent legislation may be issued by the
Executive Branch pursuant to a delegation of
authority to determine some fact or state of
things upon which the enforcement of a law
depends (Cruz, Phil. Political Law, 1996 ed., p.
96; Cruz vs. Youngberg, 56 Phil. 234 [1931]).
This is a valid delegation since what the
delegate performs is a matter of detail whereas
the statute remains complete in all essential
matters. Section 15 falls under this kind of
delegated authority. Notably, the only aspect
with respect to which the President can
exercise “discretion” is the determination of
whether deregulation may be implemented on
or before March, 1997, the deadline set by
Congress. If he so decides, however, certain
conditions must first be satisfied, to wit: (1) the
prices of crude oil and petroleum products in
the world market are declining, and (2) the
exchange rate of the peso in relation to the US
Dollar is stable. Significantly, the so-called
“discretion” pertains only to the ascertainment
of the existence of conditions which are
necessary for the effectivity of the law and not
a discretion as to what the law shall be.
In the same vein, I submit that the
President’s issuance of Executive Order No.
392 last January 22, 1997 is valid as contingent
legislation. All the Chief Executive did was to
exercise his delegated authority to ascertain
and recognize certain events or contingencies
which prompted him to advance the
deregulation to a date earlier than March,
1997. Anyway, the law does not prohibit him
from implementing the deregulation prior to
March, 1997, as long as the standards of the
law are met.
Further, the law satisfies the sufficient
standards test. The words “practicable,”
“declining,” and “stable,” as used in Sec-
387
VOL. 281, NOVEMBER 5, 1997 387

Energy
tion 15 of the assailed law are sufficient

standards that saliently “map out the
boundaries of the delegate’s authority by
defining the legislative policy and indicating
the circumstances under which it is to be
pursued and effected.” (Cruz, Phil. Political
Law, 1996 ed., p. 98). Considering the normal
and ordinary definitions of these standards, I
believe that the factors to be considered by the
President and/or Secretary of Energy in
implementing full deregulation are, as
mentioned, determinate and determinable.
It is likewise noteworthy that the above-
mentioned factors laid down by the subject law
are not solely dependent on Congress. Verily,
oil pricing and the peso-dollar exchange rate
are dependent on the various forces working
within the consumer market. Accordingly, it
would have been unreasonable, or even
impossible, for the legislature to have provided
for fixed and specific oil prices and exchange
rates. To require Congress to set forth specifics
in the law would effectively deprive the
legislature of the flexibility and practicability
which subordinate legislation is ultimately
designed to provide. Besides, said specifics are
precisely the details which are beyond the
competence of Congress, and thus, are properly
delegated to appropriate administrative
agencies and executive officials to “fill in.” It
cannot be gainsaid that the detail of the timing
of full deregulation has been “filled in” by the
President, upon the recommendation of the
DOE, when he issued Executive Order No. 329.
5. Republic Act No. 8180 is not violative of
the constitutional prohibition against
monopolies, combinations in restraint of trade,
and unfair competition. The three provisions
relied upon by petitioners (Section 5[b] on tariff
differential; Section 6 on the 40-day minimum
inventory requirement; and Section 9[b] on the
prohibited act of predatory pricing) actually
promote, rather than restrain, free trade and
competition.
The tariff differential provided in the
assailed law does not necessarily make the
business of importing refined petroleum
products a losing proposition for new players.
First, the decision of a prospective
trader/importer (subjected to the 7% tariff rate)
to compete in the downstream oil industry as a
388

ANNOTATED
Energy
new player is based solely on whether he can,

based on his computations, generate the
desired internal rate of return (IRR) and net
present value (NPV) notwithstanding the
imposition of a higher tariff rate. Second, such
a difference in tax treatment does not
necessarily provide refiners of imported crude
oil with a significant level of economic
advantage considering the huge amount of
investments required in putting up refinery
plants which will then have to be added to said
refiners’ production cost. It is not unreasonable
to suppose that the additional cost imputed by
higher tariff can anyway be overcome by a new
player in the business of importation due to
lower operating costs, lower capital infusion,
and lower capital carrying costs. Consequently,
the resultant cost of imported finished
petroleum and that of locally refined petroleum
products may turn out to be approximately the
same.
The existence of a tariff differential with
regard to imported crude oil and imported
finished products is nothing new or novel. In
fact, prior to the passage of Republic Act No.
8180, there existed a 10% tariff differential
resulting from the imposition of a 20% tariff
rate on imported finished petroleum products
and 10% on imported crude oil (based on
Executive Order No. 115). Significantly,
Section 5(b) of the assailed law effectively
lowered the tariff rates from 20% to 7% for
imported refined petroleum products, and 10%
to 3% for imported crude oil, or a reduction of
the differential from 10% to 4%. This provision
is certainly favorable to all in the downstream
oil industry, whether they be existing or new
players. It thus follows that the 4% tariff
differential aims to ensure the stable supply of
petroleum products by encouraging new
entrants to put up oil refineries in the
Philippines and to discourage fly-by-night
importers.
Further, the assailed tariff differential is
likewise not violative of the equal protection
clause of the Constitution. It is germane to the
declared policy of Republic Act No. 8180 which
is to achieve (1) fair prices; and (2) adequate
and continuous supply of environmentally-
clean and high quality petroleum products.
Said adequate and continuous supply of
petroleum products will be achieved if new
investors or players are en-
389
VOL. 281, NOVEMBER 5, 1997 389

Energy
ticed to engage in the business of refining crude

oil in the country. Existing refining companies,
are similarly encouraged to put up additional
refining companies. All of this can be made
possible in view of the lower tariff duty on
imported crude oil than that levied on imported
refined petroleum products. In effect, the lower
tariff rates will enable the refiners to recoup
their investments considering that they will be
investing billions of pesos in putting up their
refineries in the Philippines. That incidentally
the existing refineries will be benefited by the
tariff differential does not negate the fact that
the intended effect of the law is really to
encourage the construction of new refineries,
whether by existing players or by new players.
As regards the 40-day inventory
requirement, it must be emphasized that the
10% minimum requirement is based on the
refiners’ and importers’ annual sales volume,
and hence, obviously inapplicable to new
entrants as they do not have an annual sales
volume yet. Contrary to petitioners’ argument,
this requirement is not intended to discourage
new or prospective players in the downstream
oil industry. Rather, it guarantees “security
and continuity of petroleum crude and products
supply.” (Section 6, Republic Act No. 8180) This
legal requirement is meant to weed out entities
not sufficiently qualified to participate in the
local downstream oil industry. Consequently, it
is meant to protect the industry from fly-by-
night business operators whose sole interest
would be to make quick profits and who may
prove unreliable in the effort to provide an
adequate and steady supply of petroleum
products in the country. In effect, the
aforestated provision benefits not only the
three respondent oil companies but all entities
serious and committed to put up storage
facilities and to participate as serious players
in the local oil industry. Moreover, it benefits
the entire consuming public by its guarantee of
an “adequate continuous supply of
environmentally-clean and high-quality
petroleum products.” It ensures that all
companies in the downstream oil industry
operate according to the same high standards,
that the necessary storage and distribution
facilities are in place to support the level of
business
390

ANNOTATED
Energy
activities involved, and that operations are

conducted in a safe and environmentally sound
manner for the benefit of the consuming public.
Regarding the prohibition against predatory
pricing, I believe that petitioners’ argument is
quite misplaced. The provision actually
protects new players by preventing, under pain
of criminal sanction, the more established oil
firms from driving away any potential or actual
competitor by taking undue advantage of their
size and relative financial stability. Obviously,
the new players are the ones susceptible to
closing down on account of intolerable losses
which will be brought about by fierce
competition with rival firms. The petitioners
are merely working under the presumption
that it is the new players which would succumb
to predatory pricing, and not the more
established oil firms. This is not a factual
assertion but a rather baseless and conjectural
assumption.
As to the alleged cartel among the three
respondent oil companies, much as we suspect
the same, its existence calls for a finding of fact
which this Court is not in the position to make.
We cannot be called to try facts and resolve
factual issues such as this (Trade Unions of the
Phils. vs. Laguesma, 236 SCRA 586 [1994];
Ledesma vs. NLRC, 246 SCRA 247 [1995]).
With respect to the amendatory bills filed by
various Congressmen aimed to modify the
alleged defects of Republic Act No. 8180, I
submit that such bills are the correct remedial
steps to pursue, instead of the instant petitions
to set aside the statute sought to be amended.
The proper forum is Congress, not this Court.
Finally, as to the ponencia’s endnote which
cites the plea of respondent oil companies for
the lifting of the restraining order against them
to enable them to adjust the prices of petroleum
and petroleum products in view of the
devaluation of our currency, I am pensive as to
how the matter can be addressed to the
obviously defunct Energy Regulatory Board.
There has been a number of price increases in
the meantime. Too much water has passed
under the bridge. It is too difficult to turn back
the hands of time.
391
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Energy
For all the foregoing reasons, I, therefore, vote

for the outright dismissal of the instant
consolidated petitions for lack of merit.
DISSENTING OPINION
FRANCISCO, J.:
The continuing peso devaluation and the

spiraling cost of commodities have become hard
facts of life nowadays. And the wearies are
compounded by the ominous prospects of very
unstable oil prices. Thus, with the goal of
rationalizing the oil scheme, Congress enacted
Republic Act No. 8180, otherwise known as the
Downstream Oil Deregulation Act of 1996, the
policy of which is “to foster a truly competitive
market which can better achieve the social
policy objectives of fair prices and adequate,
continuous supply of environmentally-clean
1
and high quality petroleum products.” But if
the noble and laudable objective of this
enactment is not accomplished, as to date oil
prices continue to rise, can this Court be called
upon to declare the statute unconstitutional or
must the Court desist from interfering in a
matter which is best left to the other branch/es
of government?
The apparent thrust of the consolidated
petitions is to declare, not the entirety, but only
some isolated portions of Republic Act No. 8180
unconstitutional. This is clear from the grounds
enumerated by the petitioners, to wit:
G.R. No. 124360
“4.0. Grounds:
4.1.
“THE IMPOSITION OF DIFFERENT TARIFF

RATES ON IMPORTED CRUDE OIL AND
IMPORTED REFINED PETROLEUM PRODUCTS
VIOLATES THE EQUAL PROTECTION OF THE
LAWS.
_______________
1 Section 2, Republic Act No. 8180.
392

ANNOTATED
Energy
4.2.
“THE IMPOSITION OF DIFFERENT TARIFF

RATES DOES NOT DEREGULATE THE
DOWNSTREAM OIL INDUSTRY, INSTEAD, IT
CONTROLS THE OIL INDUSTRY, CONTRARY TO
THE AVOWED POLICY OF THE LAW.
4.3.
“THE INCLUSION OF A TARIFF PROVISION
IN SECTION 5(b) OF THE DOWNSTREAM OIL
INDUSTRY DEREGULATION LAW VIOLATES
THE ‘ONE SUBJECT-ONE TITLE’ RULE
EMBODIED IN ARTICLE2
VI, SECTION 26(1) OF
THE CONSTITUTION.”
G.R. No. 127867
“GROUNDS
“THE IMPLEMENTATION OF FULL

DEREGULATION PRIOR TO THE EXISTENCE OF
A TRULY COMPETITIVE MARKET VIOLATES
THE CONSTITUTION PROHIBITING
MONOPOLIES, UNFAIR COMPETITION AND
PRACTICES IN RESTRAINT OF TRADE.
“R.A. NO. 8180 CONTAINS DISGUISED
REGULATIONS IN A SUPPOSEDLY
DEREGULATED INDUSTRY WHICH CREATE OR
PROMOTE MONOPOLY OF THE OIL INDUSTRY
BY THE THREE EXISTING OIL COMPANIES.
“THE REGULATORY AND PENAL
PROVISIONS OF R.A. NO. 8180 VIOLATE THE
EQUAL PROTECTION OF THE LAWS, DUE
PROCESS OF LAW AND THE CONSTITUTIONAL
RIGHTS OF AN ACCUSED TO BE INFORMED OF
THE NATURE AND CAUSE
3
OF THE
ACCUSATION AGAINST HIM.”
And culled from petitioners’ arguments in

support of the above grounds the provisions of
Republic Act No. 8180 which they now impugn
are:
_______________
2 Petition in G.R. No. 124360, p. 8.

3 Supplement to the Petition in G.R. No. 127867, p. 2.
393
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Energy
A. Section 5(b) on the imposition of tariff which

provides: “Any law to the contrary notwithstanding
and starting with the effectivity of this Act, tariff
duty shall be imposed and collected on imported
crude oil at the rate of three percent (3%), and
imported refined petroleum products at the rate of
seven percent (7%), except fuel oil and LPG, the rate
for which shall be the same as that for imported
crude oil: Provided, That beginning on January 1,
2004 the tariff rate on imported crude oil and refined
petroleum products shall be the same: Provided
further, That this provision may be amended only by
an Act of Congress.” [Emphasis added].
B. Section 6 on the minimum inventory
requirement, thus: “Security of Supply.—To ensure
the security and continuity of petroleum crude and
products supply, the DOE shall require the refiners
and importers to maintain a minimum inventory
whichever is lower.”
C. Section 9(b) on predatory pricing: “Predatory
pricing which means selling or offering to sell any
product at a price unreasonably below the industry
average cost so as to attract customers to the
detriment of competitors.
“Any person, including but not limited to the chief
operating officer or chief executive officer of the
corporation involved, who is found guilty of any of
the said prohibited acts shall suffer the penalty of
imprisonment for three (3) years and fine ranging
from Five hundred thousand pesos (P500,000) to
One million pesos (P1,000,000).”
D. Section 10 on the other prohibited acts which
states: “Other Prohibited Acts.—To ensure
compliance with the provisions of this Act, the
failure to comply with any of the following shall
likewise be prohibited: 1) submission of any
reportorial requirements; 2)maintenance of the
minimum inventory; and, 3) use of clean and safe
(environment and worker-benign) technologies.
“Any person, including but not limited to the chief
operating officer or chief executive officer of the
corporation involved, who is found guilty of any of
the said prohibited acts shall suffer the penalty of
imprisonment for two (2) years and fine ranging
from Two hundred fifty thousand pesos (P250,000) to
Five hundred thousand pesos (P500,000).”
E. Section 15 on the implementation of full
deregulation, thus: “Implementation of Full
Deregulation.—Pursuant to Section 5(e) of Republic
Act No. 7683, the DOE shall, upon approval of the
394

President, implement the full deregulation of the

downstream oil industry not later than March, 1997.
As far as practicable, the DOE shall time the full
deregulation when the prices of crude oil and
petroleum products in the world market are
declining and when the exchange rate of the peso in
relation to the US dollar is stable. Upon the
implementation of the full deregulation as provided
herein, the transition phase is deemed terminated
and the following laws are deemed repealed: x x x .”
[Emphasis added].
F. Section 20 on the imposition of administrative
fine: “Administrative Fine.—The DOE may, after
due notice and hearing impose a fine in the amount
of not less than One hundred thousand pesos
(P100,000) but not more than One million pesos
(P1,000,000) upon any person or entity who violates
any of its reportorial and minimum inventory
requirements, without prejudice to criminal
sanctions.”
Executive Order No. 392, entitled “Declaring

Full Deregulation Of The Downstream Oil
Industry” which declared the full deregulation
effective February 8, 1997, is also sought to be
declared unconstitutional.
A careful scrutiny of the arguments
proffered against the constitutionality of
Republic Act No. 8180 betrays the petitioners’
underlying motive of calling upon this Court to
determine the wisdom and efficacy of the
enactment rather than its adherence to the
Constitution. Nevertheless, I shall address the
issues raised if only to settle the alleged
constitutional defects afflicting some provisions
of Republic Act No. 8180. To elaborate:
A. On the imposition of tariff. Petitioners
argue that the existence of a tariff 4
provision
violated the “one subject-one title” rule under
Article VI, Section 26(1) as the5 imposition of
tariff rates is “inconsistent with” and not at all
germane to the deregulation of the oil industry.
They also stress that the variance between the
seven percent (7%) duty on imported gasoline
and other refined petroleum products and three
percent (3%) duty on crude oil gives a “4% tariff
protection in
_______________

5 Id.
395
VOL. 281, NOVEMBER 5, 1997 395

Energy
favor of Petron, Shell and Caltex6

which own
and operate refineries here.” The provision,
petitioners insist, “inhibits prospective oil
players to do business here because it will
unnecessarily
7
increase their product cost by
4%.” In other words, the tariff rates “does8
not
foster ‘a truly competitive market.’ ” Also
petitioners claim that both Houses of Congress
never envisioned imposing the seven percent
(7%) and three percent (3%) tariff on refined
and crude oil products as both Houses
advocated, prior to the holding of the bicameral
conference committee, a “zero differential.”
Moreover, petitioners insist that the tariff rates
violate “the equal protection of the laws
enshrined in9 Article III, Section 1 of the
Constitution” since the rates and their
classification are not relevant in attaining the
avowed policy of the law, not based on
substantial distinctions and limited to the
existing condition.
The Constitution mandates that “every bill
passed by Congress shall embrace only one
subject which
10
shall be expressed in the title
thereof.” The object sought to be accomplished
by this mandatory requirement has been
explained by the Court in 11
the vintage case of
Central Capiz v. Ramirez, thus:
“The object sought to be accomplished and the

mischief proposed to be remedied by this provision
are well known. Legislative assemblies, for the
dispatch of business, often pass bills by their titles
only without requiring them to be read. A specious
title sometimes covers legislation which, if its real
character had been disclosed, would not have
commanded assent. To prevent surprise and fraud
on the legislature is one of the purposes this
provision was intended to accomplish. Before the
adoption of this provision the title of a statute was
often no indication of its subject or contents.
“An evil this constitutional requirement was
intended to correct was the blending in one and the
same statute of such things as
_______________

7 Id.
8 Id.
10 Article VI, Section 26(1), Constitution.
11 40 Phil. 883.
396

were diverse in their nature, and were connected

only to combine in favor of all the advocates of each,
thus often securing the passage of several measures
no one of which could have succeeded on its own
merits. Mr. Cooley thus sums up in his review of the
authorities defining the objects of this provision: ‘It
may therefore be assumed as settled that the
purpose of this provision was: First, to prevent
hodge-podge or log-rolling legislation; second, to
prevent surprise or fraud upon the legislature by
means of provisions in bills of which the titles gave
no information, and which might therefore be
overlooked and carelessly and unintentionally
adopted; and, third, to fairly apprise the people,
through such publication of legislative proceedings
as is usually made, of the subjects of legislation that
are being considered, in order that they may have
opportunity of being heard thereon by petition or
otherwise if they shall so desire.’ 12
(Cooley’s
Constitutional Limitations, p. 143).”
The interpretation of “one subject-one title”

rule, however, is never intended to impede or
stifle legislation. The requirement is to be given
a practical rather than a technical construction
and it would be sufficient compliance if the title
expresses the general subject and all the
provisions of the enactment are 13germane and
material to the general subject. Congress is
not required to employ in the title of an
enactment, language of such precision as to
mirror, fully index or catalogue all14 the contents
and the minute details therein. All that is
required is that the title should not cover
legislation incongruous in itself, and which by
no fair intendment can be considered 15
as having
a necessary or proper connection. Hence, the
title “An Act Amending Certain Sections of
Republic Act Numbered One Thousand One
Hundred Ninety-Nine, otherwise known as the
Agricultural Tenancy Act of the Philippines”
was declared by the Court sufficient to contain
a provision empowering the Secretary of
Justice, acting through a tenancy mediation
division, to carry out a national enforce-
_______________
12 40 Phil., at p. 891.
13 Sumulong v. Commission on Elections, 73 Phil. 288,
291.
14 Lidasan v. Commission on Elections, 21 SCRA 496,
501.
15 Blair v. Chicago, 26 S. Ct. 427, 201 U.S. 400, 50 L. Ed.
801.
397
VOL. 281, NOVEMBER 5, 1997 397

Energy
ment program, 16including the mediation of

tenancy disputes. The title “An Act Creating
the Videogram Regulatory Board” was
similarly declared valid and sufficient to
embrace a regulatory tax provision, i.e., the
imposition of a thirty percent (30%) tax on the
purchase price or rental rate, as the case may
be, for every sale, lease or disposition of a
videogram containing a reproduction of any
motion picture or audiovisual program with
fifty percent (50%) of the proceeds of the tax
collected accruing to the province and the other
fifty percent (50%)17 to the municipality where
the tax is collected. Likewise, the title “An Act
To Further Amend Commonwealth Act
Numbered One Hundred Twenty, as amended
by Republic Act Numbered Twenty Six
Hundred and Forty One” was declared
sufficient to cover a provision limiting the
allowable margin of profit to not more than
twelve percent (12%) annually of its
investments plus two-month operating
expenses for franchise holder receiving at least
fifty percent (50%) of its 18 power from the
National Power Corporation.
In the case at bar, the title “An Act
Deregulating The Downstream Oil Industry,
And For Other Purposes” is adequate and
comprehensive to cover the imposition of tariff
rates. The tariff provision under Section 5(b) is
one of the means of effecting deregulation. It
must be observed that even prior to the passage
of Republic Act No. 8180 oil products have
always been subject to tariff and surely
Congress is cognizant of such fact. The
imposition of the seven percent (7%) and three
percent (3%) duties on imported gasoline and
refined petroleum products and on crude oil,
respectively, are germane to the deregulation of
the oil industry. The title, in fact, even included
the broad and all-encompassing phrase “And
For Other Purposes” thereby indicating the
legislative intent to cover anything that has
some relation to or connection with the
deregulation of the oil industry. The tax
provision is a mere tool and mechanism
considered essential by
_______________
16 Cordero v. Cabatuando, 6 SCRA 418.

17 Tio v. Videogram Regulatory Board, 151 SCRA 208.
18 Alalayan v. National Power Corp., 24 SCRA 172.
398

ANNOTATED
Energy
Congress to fulfill Republic Act No. 8180’s

objective of fostering a competitive market and
achieving the social policy objectives of fair
prices. To curtail any adverse impact which the
tariff treatment may cause by its application,
and perhaps in answer to petitioners’
apprehension Congress included under the
assailed section a proviso that will effectively
eradicate the tariff difference in the treatment
of refined petroleum products and crude oil by
stipulating “that beginning on January 1, 2004
the tariff rate on imported crude oil and refined
petroleum products shall be the same.”
The contention that tariff 19“does not foster a
truly competitive market” and therefore
restrains trade and does not help achieve the
purpose of deregulation is an issue not within
the power of the Court to resolve. Nonetheless,
the Court’s pronouncement in Tio vs.
Videogram Regulatory Board appears to be
worth reiterating:
“Petitioner also submits that the thirty percent

(30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it is
beyond serious question that a tax does not cease to
be valid merely because it regulates, discourages, or
even definitely deters the activities taxed. The power
to impose taxes is one so unlimited in force and so
searching in extent, that the courts scarcely venture to
declare that it is subject to any restrictions whatever,
except such as rest in the discretion of the authority
which exercises it. In imposing a tax, the legislature
acts upon its constituents. This is, in general, a
sufficient 20security against erroneous and oppressive
taxation.” [Emphasis added]
Anent petitioners’ claim that both House Bill

No. 5264 and Senate Bill No. 1253, [the
precursor bills of Republic Act No. 8180], “did
not impose any tariff rates but merely set the
policy of ‘zero differential’ in the House version,
21
and nothing in the Senate version” is
inconsequential. Suffice it to state that the
bicameral conference committee report was
approved
_______________

20 151 SCRA at 215.
399
VOL. 281, NOVEMBER 5, 1997 399

Energy
by the conferees thereof only “after full and free

conference” on the disagreeing provisions of
Senate Bill No. 1253 and House Bill No. 5264.
Indeed, the “zero differential” on the tariff rates
imposed in the House version was embodied in
the law, save for a slight delay in its
implementation to January 1, 2004. Moreover,
any objection on the validity of provisions
inserted by the legislative bicameral conference
committee has been passed upon by the Court
in the recent
22
case of Tolentino v. Secretary of
Finance, which, in my view, laid to rest any
doubt as to the validity of the bill emerging out
of a Conference Committee. The Court in that
case, speaking through Mr. Justice Mendoza,
said:
“As to the possibility of an entirely new bill emerging

out of a Conference Committee, it has been
explained:
‘Under congressional rules of procedure,
conference committees are not expected to make any
material change in the measure at issue, either by
deleting provisions to which both houses have
already agreed or by inserting new provisions. But
this is a difficult provision to enforce. Note the
problem when one house amends a proposal
originating in either house by striking out
everything following the enacting clause and
substituting provisions which make it an entirely
new bill. The versions are now altogether different,
permitting a conference committee to draft
essentially a new bill . . .’
“The result is a third version, which is considered
an ‘amendment in the nature of a substitute,’ the
only requirement for which being that the third
version be germane to the subject of the House and
Senate bills.
“Indeed, this Court recently held that it is within
the power of a conference committee to include in its
report an entirely new provision that is not found
either in the House bill or in the Senate bill. If the
committee can propose an amendment consisting of
one or two provisions, there is no reason why it
cannot propose several provisions, collectively
considered as an ‘amendment in the nature of a
substitute,’ so long as such amendment is germane
to the subject of the bills before the committee. After
all, its report was not final but needed the approval
of both houses of Congress to become valid as an act
of the legislative department. The charge that in this
case the
_______________
22 235 SCRA 632.
400

Conference Committee acted as a third legislative
chamber is thus without any basis.
x x x x x x x x x
“To be sure, nothing in the Rules [of the Senate
and the House of Representatives] limits a
conference committee to a consideration of
conflicting provisions. But Rule XLVI, (Sec.) 112 of
the Rules of the Senate is cited to the effect that ‘If
there is no Rule applicable to a specific case the
precedents of the Legislative Department of the
Philippines shall be resorted to, and as a supplement
of these, the Rules contained in Jefferson’s Manual.’
The following is then quoted from the Jefferson’s
Manual.
‘The managers of a conference must confine themselves to

the differences committed to them . . . and may not include
subjects not within disagreements, even though germane
to a question in issue.’
“Note that, according to Rule XLIX, (Sec.) 112, in

case there is no specific rule applicable, resort must
be to the legislative practice. The Jefferson’s Manual
is resorted to only as supplement. It is common place
in Congress that conference committee reports
include new matters which, though germane, have
not been committed to the committee. This practice
was admitted by Senator Raul S. Roco, petitioner in
G.R. No. 115543, during the oral argument in these
cases. Whatever, then, may be provided in the
Jefferson’s Manual must be considered to have been
modified by the legislative practice. If a change is
desired in the practice it must be sought in Congress
since this question is not covered by any
constitutional provision but is only an internal rule
of each house. Thus, Art. VI, (Sec.) 16(3) of the
Constitution provides that ‘Each House may
determine the rules of its proceedings. . .’
“This observation applies to the other contention
that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference
Committee Report because the Report did not
contain a ‘detailed and sufficiently explicit statement
of changes in, or amendments to, the subject
measure.’ The Report used brackets and capital
letters to indicate the changes. This is a standard
practice in bill-drafting. We cannot say that in using
these marks and symbols the Committee violated
the Rules of the Senate and the House. Moreover,
this Court is not the proper forum for the
enforcement of these internal Rules. To the contrary,
as we have already ruled, ‘parliamentary rules are
merely procedural and with their observance the
courts have no concern.’ Our concern is with the
401
VOL. 281, NOVEMBER 5, 1997 401

procedural requirements of the Constitution for the

enactment of laws. As far as these requirements are
concerned, we are satisfied that23 they have been
faithfully observed in these cases.”
The other contention of petitioners that Section

5(b) “violates the equal protection of the laws
enshrined in24 Article III, Section 1 of the
Constitution” deserves a short shrift for the
equal protection clause does not forbid
reasonable classification based upon
substantial distinctions where the classification
is germane to the purpose of the law and
applies equally to all the members of the class.
The imposition of three percent (3%) tariff on
crude oil, which is four percent (4%) lower than
those imposed on refined oil products, as
persuasively argued by the Office of the
Solicitor General, is based on the substantial
distinction that importers of crude oil, by
necessity, have to establish and maintain
refinery plants to process and refine the crude
oil thereby adding to their production costs. To
encourage these importers to set up refineries
involving huge expenditures and investments
which peddlers and importers of refined
petroleum products do not shoulder, Congress
deemed it appropriate to give a lower tariff rate
to foster the entry of new “players” and
investors in line with the law’s policy to create
a competitive market. The residual contention
that there is no substantial distinction in the
imposition of seven percent (7%) and three
percent (3%) tariff since the law itself will level
the tariff rates between the imported crude oil
and refined petroleum products come January
1, 2004, to my mind, is addressed more to the
legislative’s prerogative to provide for the
duration and period of effectivity of the
imposition. If Congress, after consultation,
analysis of material data and due deliberations,
is convinced that by January 1, 2004, the
investors and importers of crude oil would have
already recovered their huge investments and
expenditures in establishing refineries and
plants then it is within its prerogative to lift
the tariff differential. Such matter is well
within the pale of legislative power
_______________
23 235 SCRA at pp. 667-671.

402

ANNOTATED
Energy
which the Court may not fetter. Besides, this

again is in line with Republic Act No. 8180’s
avowed policy to foster a truly competitive
market which can achieve the social policy
objectives of fair, if not lower, prices.
B. On the minimum inventory requirement.
Petitioners’ attack on Section 6 is premised
upon their belief that the inventory
requirement is hostile and not conducive for
new oil companies to operate here, and unduly
favors Petron, Shell and Caltex, companies
which according to them can easily hurdle the
requirement. I fail to see any legal or
constitutional issue here more so as it is not
raised by a party with legal standing for
petitioners do not claim to be the owners or
operators of new oil companies affected by the
requirement. Whether or not the requirement
is advantageous, disadvantageous or conducive
for new oil companies hinges on presumptions
and speculations which is not within the realm
of judicial adjudication. It may not be amiss to
mention here that according to the Office of the
Solicitor General “there are about thirty (30)
new entrants in the downstream activities x x
x, fourteen (14) of which have started operation
x x x, eight (8) having commenced operation
last March 1997, and the rest to operate
between the 25
second quarter of 1997 and the
year 2000.” Petitioners did not controvert this
averment which thereby cast serious doubt
over their claim of “hostile” environment.
C. On predatory pricing. What petitioners
bewail the most in Section 9(b) is “the
definition of ‘predatory pricing’ [which] is
26
too
broad in scope and indefinite in meaning” and
the penal sanction imposed for its violation.
Petitioners maintain that it would be the new
oil companies or “players” which would lower
their prices to gain a foothold on the market
and not Petron, Shell or Caltex, an occasion for
these three big oil “companies” to control the
prices by keeping their average
_______________
25 Comment of the Office of the Solicitor General in G.R.

No. 127867, p. 33; Rollo, p. 191.
403
VOL. 281, NOVEMBER 5, 1997 403

Energy
cost at a level27 which will ensure their desired

profit margin. Worse, the penal sanction, they
add, deters new “players” from entering the oil
market and the practice of lowering prices is
now condemned as a criminal act.
Petitioners’ contentions are nebulous if not
speculative. In the absence of any concrete
proof of evidence, the assertion that it will only
be the new oil companies which will lower oil
prices remains a mere guess or suspicion. And
then again petitioners are not the proper party
to raise the issue. The query on why lowering of
prices should be penalized and the broad scope
of predatory pricing is not for this Court to
traverse the same being reserved for Congress.
The Court should not lose sight of the fact that
its duty under Article 5 of the Revised Penal
Code is not to determine, define and legislate
what act or acts should be penalized, but
simply to report to the Chief Executive the
reasons why it believes an act should be
penalized, as well as why it considers a penalty
excessive, thus:
“ART. 5. Duty of the court in connection with acts

which should be repressed but which are not covered
by the law, and in cases of excessive penalties.—
Whenever a court has knowledge of any act which it
may deem proper to repress and which is not
punishable by law, it shall render the proper
decision, and shall report to the Chief Executive,
through the Department of Justice, the reasons
which induce the court to believe that said act
should be made the subject of legislation.
“In the same way the court shall submit to the
Chief Executive, through the Department of Justice,
such statement as may be deemed proper, without
suspending the execution of the sentence, when a
strict enforcement of the provisions of this Code
would result in the imposition of a clearly excessive
penalty, taking into consideration the degree of
malice and the injury caused by the offense.”
Furthermore, in the absence of an actual

conviction for violation of Section 9(b) and the
appropriate appeal to this Court, I fail to see
the need to discuss any longer the issue as it is
not ripe for judicial adjudication. Any
pronouncement on the legality of the sanction
will only be advisory.
_______________
27 Id.
404

ANNOTATED
Energy
D. On other prohibited acts. In discussing their

objection to Section 10, together with Section
20, petitioners assert that these sanctions
“even provide stiff criminal and administrative
penalties for failure to maintain said minimum
requirement and other regulations” and posed
this query: “Are these provisions consistent
with the policy objective to level the28 playing
[field] in a truly competitive answer?” A more
circumspect analysis of petitioners’ grievance,
however, does not present any legal
controversy. At best, their objection deals on
policy considerations that can be more
appropriately and effectively addressed not by
this Court but by Congress itself.
E. On the implementation of full
deregulation under Section 15, and the validity
of Executive Order No. 392. Petitioners stress
that “Section 15 of Republic Act No.8180
delegates to the Secretary of Energy and to the
President of the Philippines the power to
determine when to fully 29
deregulate the
downstream oil industry” without providing
for any standards “to determine when the
prices of crude oil in the world30
market are
considered to be ‘declining’ ” and when may
the exchange rate be considered “stable” for
purposes of determining when it 31 is
“practicable” to declare full deregulation. In
the absence of standards, Executive Order No.
392 which implemented 32
Section 15 constitute
“executive lawmaking,” hence the same should
likewise be struck down as invalid. Petitioners
additionally decry the brief seven (7) month
transition period under Section 15 of Republic
Act No. 8180. The premature full deregulation
declared in Executive Order No. 392 allowed
Caltex, Petron and Shell oil companies “to
define the conditions under which any ‘new
players’ will have to adhere to in order to
become competitive in the new deregulated
market even
33
before such a market has been
created.”
_______________

30 Id.
31 Id.
32 Id., p. 10.
405
VOL. 281, NOVEMBER 5, 1997 405

Energy
Petitioners are emphatic that Section 15 and

Executive Order No. 392 “have effectively
legislated a cartel among respondent oil
companies, directly violating the Constitutional
prohibition against unfair trade practices
34
and
combinations in restraint of trade.”
Section 15 of Republic Act No. 8180 provides
for the implementation of full deregulation. It
states:
Section 15 on the implementation of full

deregulation, thus: “Implementation of Full
Deregulation.—Pursuant to Section 5(e) of Republic
Act No. 7683, the DOE shall, upon approval of the
President, implement the full deregulation of the
downstream oil industry not later than March, 1997.
As far as practicable, the DOE shall time the full
deregulation when the prices of crude oil and
declining and when the exchange rate of the peso in
relation to the US dollar is stable. Upon the
implementation of the full deregulation as provided
herein, the transition phase is deemed terminated
and the following laws are deemed repealed: x x
x.”[Emphasis added].
It appears from the foregoing that deregulation

has to be implemented “not later than March
1997.” The provision is unequivocal, i.e.,
deregulation must be implemented on or before
March 1997. The Secretary of Energy and the
President is devoid of any discretion to move
the date of full deregulation to any day later
than March 1997. The second sentence which
provides that “[a]s far as practicable, the DOE
shall time the full deregulation when the prices
of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
dollar is stable” did not modify or reset to any
other date the full deregulation of downstream
oil industry. Not later than March 1997 is a
complete and definite period for full
deregulation. What is conferred to the
Department of Energy in the implementation of
full deregulation, with the approval of the
President, is not the power and discretion on
what the law should be. The provision of
Section 15 gave the President the authority to
proceed with deregulation on or before, but not
_______________
34 Id.
406
ANNOTATED
Energy
after, March 1997, and if implementation is

made before March, 1997, to execute the same,
if possible, when the prices of crude oil and
declining and the peso-dollar exchange rate is
stable. But if the implementation is made on
March, 1997, the President has no option but to
implement the law regardless of the conditions
of the prices of oil in the world market and the
exchange rates.
The settled rule is that the legislative
department may not delegate its power. Any
attempt to abdicate it is unconstitutional and
void, based on the principle of potestas delegata
non delegare potest. In testing whether a
statute constitutes an undue delegation of
legislative power or not, it is usual to inquire
whether the statute was complete in all its
terms and provisions when it left the hands of
the legislative so that nothing was left to the
judgment of any35 other appointee or delegate of
the legislature. An enactment is said to be
incomplete and invalid if it does not lay down
any rule or definite standard by which the
administrative officer may be guided in the
exercise
36
of the discretionary
37
powers delegated
to it. In People v. Vera, the Court laid down a
guideline on how to distinguish which power
may or may not be delegated by Congress, to
wit:
“ ‘The true distinction,’ says Judge Ranney, ‘is

between the delegation of power to make the law,
which necessarily involves a discretion as to what it
shall be, and conferring an authority or discretion as
to its execution, to be exercised under and in
pursuance of the law. The first cannot be done; to
the latter no valid objection can be made.’
(Cincinnati, W. & Z.R. Co. vs. Clinton County
Comrs. [1852]; 1 Ohio St., 77, 88 See also,
Sutherland on Statutory Construction, sec. 68.)”
_______________
35 People v. Vera, 65 Phil. 56, 115, citing 6. R.C.L., p.

165.
36 Id., at p. 116, citing Scheter v. U.S., 295 U.S., 495; 79
L. Ed., 1570; 55 Supt. Ct. Rep. 837; 97 A.L.R. 947; People
ex rel.; Rice v. Wilson Oil Co., 364 Ill. 406; 4 N.E. [2d], 847;
107 A.L.R., 1500.
37 Id., at p. 117.
407
VOL. 281, NOVEMBER 5, 1997 407

Energy
Applying these parameters, I fail to see any

taint of unconstitutionality that could vitiate
the validity of Section 15. The discretion to
ascertain when may the prices of crude oil in
the world market be deemed “declining” or
when may the peso-dollar exchange rate be
considered “stable” relates to the assessment
and appreciation of facts. There is nothing
essentially legislative in ascertaining the
existence of facts or conditions38 as the basis of
the taking into effect of a law so as to make
the provision an undue delegation of legislative
power. The alleged lack of definitions of the
terms employed in the statute does not give
rise to undue delegation either for the words of
the statute,
39
as a rule, must be given its literal
meaning. Petitioners’ contentions are
concerned with the details of execution by the
executive officials tasked to implement
deregulation. No proviso in Section 15 may be
construed as objectionable for the legislature
has the latitude to provide that a law may take
effect upon the happening of future specified
contingencies leaving to some other person or
body the power to determine
40
when the specified
contingency has arisen. The instant petition is
similarly situated with the past cases, as
summarized in the case of People v. Vera,
where the Court ruled for the validity of
several assailed statutes, to wit:
“To the same effect are decisions of this court in

Municipality of Cardona vs. Municipality of
Binangonan ([1917], 36 Phil. 547); Rubi vs.
Provincial Board of Mindoro ([1919], 39 Phil. 660),
and Cruz vs. Youngberg ([1931], 56 Phil. 234). In the
first of these cases, this court sustained the validity
of a law conferring upon the GovernorGeneral
authority to adjust provincial and municipal
boundaries. In the second case, this court held it
lawful for the legislature to direct non-Christian
inhabitants to take up their habitation on
unoccupied lands to be selected by the provincial
governor and approved by the provincial board. In
the third case, it was held proper for the legislature
to vest in the Governor-General authority to suspend
or not, at
_______________
38 Id., at p. 118.
39 Globe-Mackay Cable and Radio Corporation v. NLRC, 206
SCRA 701, 711.
40 People v. Vera, supra, at pp. 119-120.
408

his discretion, the prohibition of the importation of

foreign cattle, such prohibition to be raised ‘if the
conditions of the country make this advisable or if
disease among foreign cattle has ceased to be a
menace
41
to the agriculture and livestock of the lands.’
”
If the Governor-General
42
in the case of Cruz v.
Youngberg can “suspend or not, at his
discretion, the prohibition of the importation of
cattle, such prohibition to be raised ‘if the
conditions of the country make this advisable
or if disease among foreign cattles has ceased
to be a menace to the agriculture and livestock
of the lands” then with more reason that
Section 15 of Republic Act No. 8180 can pass
the constitutional challenge as it has
mandatorily fixed the effectivity date of full
deregulation to not later than March 1997,
with or without the occurrence of stable peso-
dollar exchange rate and declining oil prices.
Contrary to petitioners’ protestations,
therefore, Section 15 is complete and contains
the basic conditions and terms for its execution.
To restate, the policy of Republic Act No.
8180 is to deregulate the downstream oil
industry and to foster a truly competitive
market which could lead to fair prices and
adequate supply of environmentally clean and
high-quality petroleum products. This is the
guiding principle installed by Congress upon
which the executive department of the
government must conform. Section 15 of
Republic Act No. 8180 sufficiently supplied the
metes and bounds for the execution of full
deregulation. In fact, a cursory
43
reading of
Executive Order No. 392 which advanced
deregulation to February 8,
_______________
41 Id., at pp. 117-118.

42 56 Phil. 234.
43 Executive Order No. 392 provides in full as follows:
“EXECUTIVE ORDER NO. 392

“DECLARING FULL DEREGULATION OF THE
DOWNSTREAM OIL INDUSTRY
“WHEREAS, Republic Act No. 7638, otherwise known as the

‘Department of Energy Act of 1992,’ provides that, at the end of
four years from its effectivity last December 1992, ‘the
Department [of Energy] shall, upon approval of
409
VOL. 281, NOVEMBER 5, 1997 409

Energy
1997 convincingly shows the determinable

factors or standards, enumerated under Section
15, which were taken into
_______________
the President, institute the programs and timetable of

deregulation of appropriate energy projects and activities of the
energy sector’;
“WHEREAS, Section 15 of Republic Act No. 8180, otherwise
known as the ‘Downstream Oil Industry Deregulation Act of
1996,’ provides that ‘the DOE shall, upon approval of the
President, implement the full deregulation of the downstream oil
industry not later than March, 1997. As far as practicable, the
DOE shall time the full deregulation when the prices of crude oil
and petroleum products in the world market are declining and
when the exchange rate of the peso in relation to the US dollar is
stable’;
“WHEREAS, pursuant to the recommendation of the
Department of Energy, there is an imperative need to implement
the full deregulation of the downstream oil industry because of
the following recent developments: (i) depletion of the buffer fund
on or about 7 February 1997 pursuant to the Energy Regulatory
Board’s Order dated 16 January 1997; (ii) the prices of crude oil
had been stable at $21-$23 per barrel since October 1996 while
prices of petroleum products in the world market had been stable
since mid-December of last year. Moreover, crude oil prices are
beginning to soften for the last few days while prices of some
petroleum products had already declined; and (iii) the exchange
rate of the peso in relation to the US dollar has been stable for the
past twelve (12) months, averaging at around P26.20 to one US
dollar;
“WHEREAS, Executive Order No. 377 dated 31 October 1996
provides for an institutional framework for the administration of
the deregulated industry by defining the functions and
responsibilities of various government agencies;
“WHEREAS, pursuant to Republic Act No. 8180, the
deregulation of the industry will foster a truly competitive market
which can better achieve the social policy objectives of fair prices
and adequate, continuous supply of environmentally-clean and
high quality petroleum products;
“NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
Republic of the Philippines, by the powers vested in
410

ANNOTATED
Energy
account by the Chief Executive in declaring full
deregulation. I cannot see my way clear on how
or why Executive Order No. 392, as professed
by petitioners, may be declared
unconstitutional for adding the “depletion of
buffer fund” as one of the grounds for
advancing the deregulation. The enumeration
of factors to be considered for full deregulation
under Section 15 did not proscribe the Chief
Executive from acknowledging other instances
that can equally assuage deregulation. What is
important is that the Chief Executive complied
with and met the minimum standards supplied
by the law. Executive Order No. 392 may not,
therefore, be branded as unconstitutional.
Petitioners’ vehement objections on the short
seven (7) month transition period under
Section 15 and the alleged resultant de facto
formation of cartel are matters which
fundamentally strike at the wisdom of the law
and the policy adopted by Congress. These are
outside the power of the courts to settle; thus I
fail to see the need to digress any further.
F. On the imposition of administrative fine.
The administrative fine under Section 20 is
claimed to be inconsistent with deregulation.
The imposition of administrative fine for failure
to meet the reportorial and minimum inventory
requirements, far from petitioners’ submission,
are geared towards accomplishing the noble
purpose of the law. The inventory requirement
ensures the security and continuity 44
of
petroleum crude and products supply, while
the reportorial requirement is a mere devise for
the Department of Energy to
_______________
me by law, do hereby declare the full deregulation, of the
downstream oil industry.
“This Executive Order shall take effect on 8 February 1997.
“DONE in the City of Manila, this 22nd day of January in the
year of Our Lord, Nineteen Hundred and Ninety-Seven.
(Signed)
FIDEL V. RAMOS”
44 Section 6, Republic Act No. 8180.
411
VOL. 281, NOVEMBER 5, 1997 411

Energy
monitor compliance with the law. In any event,

the issue pertains to the efficacy of
incorporating in the law the administrative
sanctions which lies outside the Court’s sphere
and competence.
In fine, it seems to me that the petitions
dwell on the insistent and recurrent arguments
that the imposition of different tariff rates on
imported crude oil and imported petroleum
products is violative of the equal protection
clause of the constitution; is not germane to the
purpose of the law; does not foster a truly
competitive market; extends undue advantage
to the existing oil refineries or companies; and
creates a cartel or a monopoly of sort among
Shell, Caltex and Petron in clear contravention
of the Constitutional proscription against
unfair trade practices and combinations in
restraint of trade. Unfortunately, this Court, in
my view, is not at liberty to tread upon or even
begin to discuss the merits and demerits of
petitioners’ stance if it is to be faithful to the
time honored doctrine of separation of powers—
the underlying
45
principle of our republican
state. Nothing is so fundamental in our
system of government than its division into
three distinct and independent branches, the
executive, the legislative and the judiciary,
each branch having exclusive cognizance of
matters within its jurisdiction, and supreme
within its own sphere. It is true that there is
sometimes an inevitable overlapping and
interlacing of functions and duties between
these departments. But this elementary tenet
remains: the legislative is vested with the
power to make law, the judiciary to apply and
interpret it. In cases like this, “the judicial
branch of the government has only one duty—
to lay the article of the Constitution which is
invoked beside the statute which is challenged
and to decide46 whether the latter squares with
the former.” This having been done and
finding no constitutional infirmity therein, the
Court’s task is finished. Now whether or not the
law fails to achieve its avowed policy because
Congress did not
_______________
45 Article II, Section 1, 1987 Constitution.

46 United States v. Butler, 297 U.S. 1.
412

ANNOTATED
Energy
carefully evaluate the long term effects of some

of its provisions is a matter clearly beyond this
Court’s domain.
Perhaps it bears reiterating that the
question of validity of every statute is first
determined by the legislative department of the
government, and the courts will resolve every
presumption in favor of its validity. The courts
will assume that the validity of the statute was
fully considered by the legislature when
adopted. The wisdom or advisability of a
particular statute is not a question for the
courts to determine. If a particular statute is
within the constitutional power of the
legislature to enact, it should be sustained
whether the courts47 agree or not in the wisdom
of its enactment. This Court continues to
recognize that in the determination of actual
cases and controversies, it must reflect the
wisdom and justice of the people as expressed
through their representatives in the executive
and legislative branches of government. Thus,
the presumption is always in favor of
constitutionality for it is likewise always
presumed that in the enactment of a law or the
adoption of a policy it is the people who speak
through their representatives. This principle is
one of caution and circumspection in the
exercise of the grave
48
and delicate function of
judicial review. Explaining this principle
Thayer said,
“It can only disregard the Act when those who have
the right to make laws have not merely made a
mistake, but have made a very clear one-so clear
that it is not open to rational question. That is the
standard of duty to which the courts bring legislative
acts; that is the test which they apply-not merely
their own judgment as to constitutionality, but their
conclusion as to what judgment is permissible to
another department which the constitution has
charged with the duty of making it. This rule
recognizes that, having regard to the great, complex,
ever-unfolding exigencies of government, much will
seem unconstitutional to one man, or body of men,
may reasonably not seem so to another; that the
constitution often admits of different interpretations;
that there is often a range of choice and judgment;
that in such cases the constitution does not
_______________
47 Case v. Board of Health, 24 Phil. 250, 276.

48 The Lawyers Journal, January 31, 1949, p. 8.
413
VOL. 281, NOVEMBER 5, 1997 413

impose upon the legislature any one specific opinion,

but leaves open their range of choice; and 49
that
whatever choice is rational is constitutional.”
The petitions discuss rather extensively the

adverse economic implications of Republic Act
No. 8180. They put forward more than
anything else, an assertion that an error of
policy has been committed. Reviewing the
wisdom of the policies adopted by the executive
and legislative departments is not within the
province of the Court.
It is safe to assume that the legislative
branch of the government has taken into
consideration and has carefully weighed all
points pertinent to the law in question. We
cannot doubt that these matters have been the
object of intensive research and study nor that
they have been subject of comprehensive
consultations with experts and debates in both
houses of Congress. Judicial review at this
juncture will at best be limited and myopic. For
admittedly, this Court cannot ponder on the
points raised in the petitions with the same
technical competence as that of the economic
experts who have contributed valuable hours of
study and deliberation in the passage of this
law.
I realize that to invoke the doctrine of
separation of powers at this crucial time may
be viewed by some as an act of shirking from
our duty to uphold the Constitution at all cost.
Let it be remembered, however, that the
doctrine of separation of powers is likewise
enshrined in our Constitution and deserves the
same degree of fealty. In fact, it carries more
significance now in the face of an onslaught of
similar cases brought before this Court by the
opponents of almost every enacted law of major
importance. It is true that this Court is the last
bulwark of justice and it is our task to preserve
the integrity of our fundamental law. But we
cannot become, wittingly or unwittingly,
instruments of every aggrieved minority and
losing legislator. While the laudable objectives
of the law
_______________
49 Id., citing Thayer, James B., “The Origin and Scope of

the American Doctrine of Constitutional Law,” p. 9.
414

ANNOTATED
Energy
are put on hold, this Court is faced with the
unnecessary burden of disposing of issues
merely contrived to fall within the ambit of
judicial review. All that is achieved is delay
which is perhaps, sad to say, all that may have
been intended in the first place.
Indeed, whether Republic Act No. 8180 or
portions thereof are declared unconstitutional,
oil prices may continue to rise, as they depend
not on any law but on the volatile market and
economic forces. It is therefore the political
departments of government that should
address the issues raised herein for the
discretion to allow a deregulated oil industry
and to determine its viability is lodged with the
people in their primary political capacity,
which as things stand, has been delegated to
Congress.
In the end, petitioners are not devoid of a
remedy. To paraphrase the words of Justice
Padilla in Kapatiran ng mga Naglilingkod 50
sa
Pamahalaan ng Pilipinas v. Tan, if
petitioners seriously believe that the adoption
and continued application of Republic Act No.
8180 are prejudicial to the general welfare or
the interests of the majority of the people, they
should seek recourse and relief from the
political branches of government, as they are
now doing by moving for an amendment of the
assailed provisions in the correct forum which
is Congress or for the exercise of the people’s
power of initiative on legislation. The Court
following the time honored doctrine of
separation of powers, cannot substitute its
judgment for that of the Congress as to the
wisdom, justice
51
and advisability of Republic Act
No. 8180.
ACCORDINGLY, finding no merit in the
instant petitions I vote for their outright
dismissal.
Petitions granted. R.A. No. 8180 declared
unconstitutional and E.O. No. 372 void.
——o0o——
_______________
50 163 SCRA 371.

51 Id., at p. 385.
415
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Tatad vs. Secretary of The Department of ENERGY

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330 SUPREME COURT REPORTS

FRANCISCO S. TATAD, petitioner, vs. THE

EDCEL C. LAGMAN, JOKER P. ARROYO,

Constitutional Law; Statutes; Courts; The courts,

VOL. 281, NOVEMBER 5, 1997 331

Tatad vs. Secretary of the Department of Energy

332 SUPREME COURT REPORTS ANNOTATED

Tatad vs. Secretary of the Department of Energy

riot. Both tests are intended to prevent a total

VOL. 281, NOVEMBER 5, 1997 333

Tatad vs. Secretary of the Department of Energy

provisions of R.A. No. 8180 so permeate its essence

KAPUNAN, J., Separate Opinion

PANGANIBAN, J., Concurring Opinion

Constitutional Law; Statutes; Courts; Court has

334 SUPREME COURT REPORTS ANNOTATED

Tatad vs. Secretary of the Department of Energy

the Constitution and, if so, to annul and set aside.—

MELO, J., Dissenting Opinion

Constitutional Law; Statutes; Courts; The

VOL. 281, NOVEMBER 5, 1997 335

Tatad vs. Secretary of the Department of Energy

Same; Same; Same; Political questions are

336 SUPREME COURT REPORTS ANNOTATED

consolidated petitions do not allege that the assailed

VOL. 281, NOVEMBER 5, 1997 337

Tatad vs. Secretary of the Department of Energy

report an entirely new provision that is neither

FRANCISCO, J., Dissenting Opinion

Constitutional Law; Statutes; Courts; Congress

338 SUPREME COURT REPORTS ANNOTATED

Tatad vs. Secretary of the Department of Energy

caution and circumspection in the exercise of the

PETITIONS to review the constitutionality of

The facts are stated in the opinion of the Court.

The petitions at bar challenge the

1 Downstream oil industry refers to the business of

VOL. 281, NOVEMBER 5, 1997 339

six (6) petroleum marketing companies (Esso,

2 Paderanga & Paderanga, Jr., The Oil Industry in the

340 SUPREME COURT REPORTS

controlling shares of Bataan Refining

1. any increase in the tax collection from

6 Makasiar, G., Structural Response to the Energy Crisis:

VOL. 281, NOVEMBER 5, 1997 341

petroleum products is less than the peso

By 1985, only three (3) oil companies were

1. Fix and regulate the prices of petroleum

On December 9, 1992, Congress enacted R.A.

7 P.D. 1956 as amended by E.O. 137.

342 SUPREME COURT REPORTS

exploration, development, 9 utilization,

9 R.A. No. 7638.

VOL. 281, NOVEMBER 5, 1997 343

transport operators and pipeline

“b) Any law to the contrary notwithstanding and

344 SUPREME COURT REPORTS

entry of other players in the oil industry

“Sec. 15. Implementation of Full Deregulation.—

E.O. No. 372 states in full, viz.:

“WHEREAS, Republic Act No. 7638, otherwise

VOL. 281, NOVEMBER 5, 1997 345

plement full deregulation of the downstream oil